In this economy, more and more people are considering bankruptcy. Many have no idea what to expect and are afraid they will not be able to recover. There are long-term consequences when a consumer files bankruptcy, for example higher interest rates or not being able to get credit at all. Depending on what chapter of the bankruptcy code you are, thinking about filing will depend on what debts are discharged and which are not. In any case, it is a difficult decision to make so here are some pros and cons to filing.
Pros: Bankruptcy could discharge some tax liabilities older than 3 years; the sooner you file the sooner you could start to rebuild your credit and is less complicated to explain to potential creditors a foreclosure, delinquencies, repossessions than a bankruptcy; bankruptcy will cease the collection of student loan debts or execution of a judgment; most state exemptions allow you enough so you may be able to keep some possessions out of the bankruptcy; stops harassing phone calls, dunning letters and other collections activities.
Cons: Most tax debt is not dischargeable; bankruptcy will reflect on your credit for 7-10 years; filing bankruptcy now would make it harder to file again within an eight year period; bankruptcy will not discharge student loans; you will lose all of your credit cards; bankruptcy is an embarrassment for some; you may lose some of your luxury possessions; obtaining a mortgage in this economy would be much harder if at all possible.
Other consequences suffered when filing for bankruptcy include, spousal support and child support do not get discharged in a bankruptcy, and filing for bankruptcy is not free. There is a filing fee for a chapter 7 of $306.
Bankruptcy is a personal decision. Depending on your financial situation, it may be the only option available to you. Do not go it alone, contact an experienced bankruptcy attorney for advice. They will have even more pros and cons to filing bankruptcy and the differences in the chapters of the bankruptcy code.