Medical and credit card debt are two leading causes of financial strain on American families. These types of debt are often unexpected and hard to recover from, even for families with very few expenses. Some families can pay off their debts by sticking to a budget for several years. However, debt is much harder to get out of than people often think. Bankruptcy can help people settle their debts.
There are several benefits to filing for bankruptcy, but families should also understand that bankruptcy does come at a price. Here are the pros and cons of bankruptcy:
You can regain financial stability
Bankruptcy is meant to help families regain financial stability, depending on whether Chapter 7 or Chapter 13 bankruptcy is filed. Chapter 7 is a nearly instantaneous debt relief option for lower-income families. Alternatively, Chapter 13 bankruptcy can organize a debt repayment plan for higher-income families to settle debts over a few years. Once the debts are settled, families can use the money that would have been used to pay off debt for other expenses.
You will see an impact on your credit score
Bankruptcy does negatively affect a person’s credit score. Once bankruptcy is filed, an individual’s credit score can sharply drop, making it harder for them to apply for new loans and credit cards. However, your credit score will increase over time if you take the right steps — and many people emerge from bankruptcy with their credit healthier than it was when they were burdened by unpaid debts.
There are no more pesky debt collection attempts
One of the issues for many families suffering from debt is debt collectors. Debt collectors can cause a lot of stress for people struggling to pay off their debts. However, once a person files for bankruptcy, debt collectors are notified, stopping them from pursuing collection actions.
If you are still not sure bankruptcy is right for you, you may want to reach out for professional legal guidance with any of your questions.
