Bankruptcy Pros and Cons

Federal bankruptcy law gives individuals who have fallen behind in repaying their debts an honorable means of starting over. If you have been late in paying your bills, your credit rating may be bad already. It’s possible that filing for bankruptcy might prove less damaging to your credit rating in the long run than a stack of bills that never get paid. Through bankruptcy you could find yourself in an improved position to pay your current bills. You may also be able to get new credit. And the best way to repair old, damaged credit is to get new credit and start making timely payments. However, bankruptcy comes with long-term consequences. The act of filing will remain on your credit record for a decade. Therefore, there are alternatives you should consider carefully.

Two kinds of personal bankruptcy filings

People file what’s called Chapter 7 bankruptcy if they have a large amount of debt incurred by, say, credit cards or medical treatment. A Chapter 7 bankruptcy requires creditors to halt all attempts to get you to pay. Most Chapter 7 bankruptcy filers get to keep all of their property. Chapter 13 bankruptcy is for people who have fallen behind repaying loans, such as for a home or a car. A Chapter 13 bankruptcy allows you to make payments in full within three to five tears while keeping the house or automobile.

The first step: an attorney’s help

Locate an attorney who specializes in personal bankruptcy filings. Work with him or her to prepare a petition and a description of your assets, liabilities and creditors. There’s a cost involved: Filing a petition for either a Chapter 7 or a Chapter 13 bankruptcy will run you approximately $200.

The affect on co-signers

If someone, such as a spouse, has co-signed a loan application with you and you file for bankruptcy, your co-signer will be as responsible as you for paying the debt. If only one spouse has debts, it’s wise to have only that spouse file the petition so that only one of you will have to deal with the record of bankruptcy. You can file for a new Chapter 7 bankruptcy every six years. You can file a new Chapter 13 bankruptcy petition at any time.

Other options to explore

You should think of bankruptcy as a last-ditch effort to get yourself back on track with your creditors. Here are several other options that you should explore first:

Budgeting. This is by far the most effective way of avoiding bankruptcy. Get your bills together and see where the money is going. Find and eliminate all unnecessary and unwanted expenditures. Set limits and stick to them.

Credit counseling. If you find that you cannot set a budget for yourself, you can get help from a credit counselor. Many can also help in negotiating with your creditors to extend payback timetables.

Debt-consolidation loans. Some lenders provide such loans to people whose credit has not yet tanked entirely. You may be able to obtain a single loan that will cover all your outstanding debts.

Withdrawing a bankruptcy petition

If your financial situation improves, you may start thinking about withdrawing your bankruptcy petition. If you believe this is right for you, follow these steps:

Talk to your attorney. He or she will file the motion to withdraw.

Make sure that any assets, such as homes or cars, will not be repossessed or foreclosed upon once the petition has been withdrawn.

Have a plan for paying your bills. Once the bankruptcy is withdrawn, your creditors will start demanding their money immediately.

Attorneys specializing in personal bankruptcy by city

Baltimore, MD
Mehlman, Greenblatt & Hare, LLC
Phone: 866-348-2474

Boston, MA
Law Offices of Richard N. Gottlieb
Phone: 866-305-7236

Chicago, IL
Law Offices of Joel A. Schechter
Phone: 866-741-4554

Dallas, TX
Michael S. Mitchell, PC
Phone: 866-740-1998

Hartford, CT
Law Offices Of Jonathan G. Cohen
Phone: 866-267-5194

Los Angeles, CA
Frandzel Robins Bloom & Csato

Los Angeles, CA
Phone: 323-852-1000

Brooklyn, NY
Law Office of Gregory Messer
Phone: 866-738-5087

Orlando, FL
Perla & Associates
Phone: 866-309-4389

Philadelphia, PA
Cibik & Cataldo, P.C.
Phone: 866-745-6190

San Francisco, CA
Law Office of Sheila Gropper Nelson
Phone: 415-362-2221