NJ Bankruptcy Attorneys
Advantages and Disadvantages of Bankruptcy
Bankruptcy is something of a double-edged sword. Although many people approach it with fear and anxiety, the truth is that filing for Chapter 13 bankruptcy or Chapter 7 bankruptcy in New Jersey can be a liberating process as well. The key is understanding how the process actually works, and what consequences may follow your filing.
Advantages of Bankruptcy
Let's start with the advantages. Bankruptcy is a chance to start over when you have gotten buried under debt, and for many people this is a welcome relief. No matter which type of bankruptcy you file, a second major advantage begins immediately: no more harassing phone calls, emails or letters from collection agencies and other creditors. Also, any bankruptcy filing, stops immediately, all creditors' ability to pursue a lawsuit and proceed with an action to collect money by any means. As soon as you file, your life quiets down, and you no longer have to live in fear of every trip to the mailbox. Of course, the most important advantage is financial. In a chapter 7, your debt is likely to be eliminated or discharged. In a chapter 13, your unsecured debt is also likely to be eliminated or substantially reduced. A chapter 13 may provide additional advantages such as:
- Saving your house from foreclosure;
- eliminating liens from real estate;
- possibly eliminating a second or third mortgage;
- eliminating a portion of your tax liability;
- and more...
Disadvantages of Bankruptcy
So those are some of the advantages of bankruptcy. What about disadvantages? If you have done any research in this area, you have probably read about the single greatest drawback to bankruptcy: the hit to your credit score. This is an important issue, but the truth is that many people assign it greater weight than it perhaps deserves. The truth is that if you are in enough debt to require bankruptcy, chances are your credit score is already distressed. Also, people may not know that even with an excellent credit score, one may not be able to obtain credit due to substantial debt or a poor income to debt ratio. Filing for bankruptcy may actually represent a chance to improve your credit score in the long term.
Other bankruptcy disadvantages could include purchasing a home or car in the near future. Again, however, the same caveats apply – poor credit and/or poor income to debt ratio will hamper goals such as these with or without bankruptcy. Therefore, bankruptcy is often the best way to start over and clear your debt altogether. Future creditors and mortgage loan officers may even look more favorably upon someone who works at repairing one's credit in the immediate aftermath of a bankruptcy, and in time you may find more options opening up.
Bankruptcy is not for everybody with debt and some people wish to resolve their debt matters by using debt management programs. I suggest to anyone who wishes to move in that direction, to perform the necessary due diligence with regard to the type of counseling agencies and programs that are available.
Contact a NJ Bankruptcy Attorney
Deciding about whether to file for bankruptcy is an important choice, and the best way to avail yourself of good information is to speak with the experts. The Law Offices of Robert Manchel have been helping clients seek brighter futures after filing for bankruptcy in New Jersey for many years. Do not hesitate to contact the New Jersey bankruptcy attorneys of The Law Offices of Robert Manchel today for a free consultation.