Bankruptcy should be the last resort, after due consideration of the other options. Bankruptcy offers legal protection to the debtors. It helps a person mired in debt, a way out, without losing everything he has at stake. These are a few things that prompt people to file for bankruptcy, when they are in a financial mess. If you are in Wisconsin, we will tell you why bankruptcy could potentially be harmful and stressful, and why the drawbacks must be understood before you decide to give up.
When a bankruptcy lawyer offers consultation to a prospective client, it is essential to enumerate the several advantages and drawbacks of bankruptcy, in general and after objectively assessing the client’s situation and, suggest the best course of action.
There are numerous disadvantages of filing for bankruptcy. There are many financial scenarios where people think they have a hit a dead end and bankruptcy seems to be the only option out. But, an attorney in the know, may find a better alternative to bankruptcy. Here’s why bankruptcy, as an option, stands at the end of the line and should be avoided by every means possible.
- The negative effect of bankruptcy on credit: Bankruptcy affects your reputation and credit. The effects of bankruptcy on credit and integrity is usually downward spiralling and the debtor’s image takes a severe beating. This may affect the debtors’ future credit and make it very difficult for them to secure loans and re-build their lives.
A chapter 7 bankruptcy will continue to haunt you for 10 years. If a debtor completes the bankruptcy process as per chapter 7 of the bankruptcy code, he/she cannot file for bankruptcy under chapter 7 for another 6 years from the last date on which bankruptcy was filed.
People usually are under the assumption that if not chapter7, bankruptcy can be filed under chapter 13 of the bankruptcy code because it allows multiple filings. They tend to overlook the fact that each filing will appear in your credit record and tarnish your eligibility for future credit.
Bankruptcy makes it nearly impossible to secure a mortgage or loan, when you most need it because it will show up in your credit report for a period of 10 years.
- Not all debts are dischargeable: Before you decide to quit, it pays to remember that not all debts are dischargeable. Tax debts are non-dischargeable in most cases. If you are nearing any foreclosure, it helps to delay bankruptcy.
Once bankruptcy is declared, the debtors cannot add to the list of unpaid debts, taxes and dues.This makes it difficult to do something in the future if something worse happens and you are looking for a solution to bail you out.
A person looking at bankruptcy as a plausible solution, must know that tax dues not more than 3 years, student loans, alimony, child support are some debts which will not be discharged by the court. So, it is best to seek legal guidance, before you decide to call it ‘quits’.
- Bankruptcy leads to a negative self-image:Filing for bankruptcy is seen by many as a black dot on your reputation and integrity in exchange for legal protection.
Adjusting to this new bankrupt lifestyle and coping with societal pressures and family responsibilities becomes very stressful for many people. Bankruptcy is often seen as an admission of defeat and places a general feeling of mistrust on the debtor.
- Cancellation of your credit cards: Most card companies may cancel your credit cards when you file for bankruptcy. This could cause some serious inconvenience, when you most need them for meeting some heavy but necessary expenditure.
- Affects employment opportunities: A bankrupt loses not just his property but also his reputation. Once a debtor declares insolvency, he/she may not be eligible for employment in some sectors, if there are terms and conditions against the employment of such a person.
There may be difficulties in seeking decent employment when your image and credit is tarnished. Thus, your efforts to re-build and re-phase may not happen as smoothly as expected if you declare bankruptcy.
Bankruptcy may relieve you from some financial obligations, but it will dent your future opportunities to employment. There are quite a few unfortunate debtors who have not been able to serve as trustee members or hold managerial positions, despite their talent and experience, because they have filed for bankruptcy.
- There may be a considerable claim on your present and future income: One of the biggest stress factors that you may have to cope-up with is that a considerable percentage of your current and future incomes may go towards debt repayment, especially if you are on a chapter 13 reorganisation as per the bankruptcy code. Chapter 7 may allow liquidation of eligible debts, but it comes with its own drawbacks. Chapter 13 allows for a long period of repayment and this may reduce your savings and other benefits.
- Bankruptcy is a long and complicated procedure: Declaring insolvency or bankruptcy should be done as a last resort with no choice. It is legally complicated and not to mention the attorney fees. However, a reasonable attorney may guide you through the other options before suggesting this long harrowing procedure to you at the very beginning itself.
A good lawyer understands the legal, financial, emotional and societal implications of bankruptcy and will not hesitate to give an objective and honest assessment. Don’t hesitate to seek legal help. Often, lawyers in green bay wi. Wisconsin area if you need to file 🙁 may show you the way out of a financial complication rather than suggesting the option of bankruptcy.