Pros and Cons of Filing Bankruptcy
Posted on April 3, 2008
Filed Under Personal Finance | 19 Comments
In some cases, filing bankruptcy solves a lot of money problems – especially if they are big problems – but going through a bankruptcy could hamper your access to low cost financing in the future. Often it is better to draw up a debt management scheme with your creditors, rather than going into bankruptcy proceedings. If you can prove you are sincere, creditors usually prefer that kind of arrangement, and a person may find their credit rating is not damaged as much when they take that route.
In spite of what you hear in the media, there is still a stigma attached to bankruptcy. And that leads many people to fear that by declaring themselves bankrupt other people will make a snap judgement about their credit worthiness, or even about their character. They are afraid they may be viewed as irresponsible with their money or “not very good at looking after their affairs”.
As a result, many people go through the agony of facing a bankruptcy and end up spending many a sleepless night worrying about how such a move will affect their lives. A major concern is whether filing bankruptcy will make it next to impossible to get credit once the process is finalized. Most experts agree this used to be more of a problem than it is today. Greater competition amongst credit card providers and other lenders has meant that companies are more open to considering lending to this group of people. In fact there are now even companies that specialize in providing credit after bankruptcy.
The fact is, while still not a pleasant experience, it is not nearly as difficult as it used to be to rebuild good credit after bankruptcy. In some cases, filing for bankruptcy with the court can be a good move for the longer term. It might be a huge blow to your credit report in the short term, but eventually it will prove to be the best choice you had at the time.
The best advice is to talk with someone who knows the facts. Consult with a financial advisor who knows the bankruptcy laws and is familiar with how the system works.
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