Should you Declare Bankruptcy?

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Under United States laws, one is allowed to file for bankruptcy using either chapter 7 or chapter 13. Whichever law one opts for to be declared bankrupt is dependent on several factors. This includes your level of income, the value of the assets you have, and how much debt you owe people, as well as the the goal you want to achieve financially.

This declaration should not be taken lightly. It has both positive, as well as negative, impacts.

Advantages

It prevents the people you owe money from claiming your property so as to settle the debts. This also includes loan debts from banks. They cannot take any action against you.

They are prevented from suing you, mailing you, or even calling you to claim their money back.

Under the chapter 13 bankruptcy laws, you are allowed to have very flexible terms as far as repayment of the debts is concerned. The repayment will depend on the level of income you have and may not extend to your personal property.

The debt obligations you had prior to being declared bankrupt are considered null and void. This is regardless of whether you file for bankruptcy under chapter 7 or chapter 17. The creditors will no longer have an authority to put you under pressure either through mails or calls to pay back your debt. You will then have to agree on repayment terms that are financially viable to you.

Gives an exemption as to which of your items can be sold to pay back those you owe. It should not extend beyond your luxury belongings. The items that may not be claimed include your home, items within your household, property that earns you an income and your vehicle, as well as other properties.

Disadvantages

You have to give up items that can be categorized as luxuries. These items are taken by the court and sold to pay back the money you owe individuals as well as financial institutions. This means that not everything you own is exempted. This may also affect your credit cards.
It does not affect your obligation to pay your student loan. This means that those who have student debts still have to pay it back regardless of being declared bankrupt under either chapter 7 or chapter 13. Take this with the knowledge you are already under financial strain.
You have to pay for the expenses involved, such as filing for the case, paying for your attorney, payment for trustees where applicable, among other charges. This makes the whole process very expensive, especially considering that you are already dealing with financial difficulties.
May have a negative implication on your reputation. This is mainly because your name may appear in newspapers of wide circulation. No one wants their financial struggles known by everyone. However, you are legally allowed to request your name not to be published in such newspaper. If the request is granted then you are safe.
Has a negative implication on your credit rating. This is especially so if you had very high ratings before filing for bankruptcy. This record may be kept for a period of between seven to ten years. This hinders you from obtaining any mortgage or loan for a very long period of time before you are eventually allowed. This can be a big financial setback.