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In deciding if you should declare bankruptcy or not, there are several factors you may want to consider. Not only does it affect your future credit, but it can affect your self-image and reputation.  On the other hand, collections cease and can give you peace of mind and better quality of life.

The following list may help you make this decision.

  1. The primary negative is that a bankruptcy such as a Chapter 7 can remain on your credit report for up to 10 years. However, not filing bankruptcy and continuing to struggle with payments and issues such as missed payments, repossessions, defaults and lawsuits can also negatively affect your credit and may even be more difficult to deal with in the future.
  2. Filing bankruptcy also means that you will lose property that is not exempt from sale by the bankruptcy trustee, including some luxury possessions. However, after you file for Chapter 7, you will get to keep the wages you earn and property you buy after the filing.
  3. You will not be able to keep your credit cards that have balances owed. You may be able to get new credit cards within one to three years of filing bankruptcy, but most likely, you will have to pay a much higher interest rate.
  4. A mortgage will be very difficult, if not impossible, to get if you have filed for bankruptcy. If you can find a lender that specializes in “bad risks”, it will probably come with a very high interest rate.
  5. You can only file Chapter 7 bankruptcy once every 8 years, although you can file for Chapter 13, which will also appear on your credit record.
  6. Even if you file for bankruptcy, you still have to pay debts that are non-dischargeable, such as alimony, child support, and student loans.  Student loans may be discharged if you can show undue hardship.  The list is not exhaustive.  There are more non-dischargeable debts.
  7. When you file for bankruptcy, you have to explain to a judge or trustee how you got into your financial difficulties.

These are a few of the pros and cons of filing for bankruptcy.  Contacting a local bankruptcy lawyer to discuss your options and the ways the law can help you address your financial troubles will aid  in your decision whether to file bankruptcy or not.

DISCLAIMER:  The above is a general guideline and not to be taken as legal advice.  If you want legal advice, call (209) 567-1040 to speak with attorney Aaron Anguiano.

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