I’m going to assume that by now you know that filing bankruptcy can free consumer’s trapped in a financial situation that is so deep that the maximum benefit is only short term. Also, remember that any type of bankruptcy should be the final step of a carefully considered and elaborate plan, and not used as a “do-it-yourself bankruptcy”.

Filing bankruptcy is a decision regarding your financial future. In a Chapter 7, 12, or 13 filing, you can get a fresh start. Having a plan and exercising good judgement will help enhance your stand to “debt-free”. If you have tried all of other methods including debt negotiation and consolidation, and still you are buried deep in debt then bankruptcy might be your choice. Bankruptcy will wipe your slate clean and give you a fresh start so there is no lingering negative impact on your credit report. Many debts are discharged completely. Some are re-organized in a manner that should save you money. And still other debts reorganize for pennies.

Pros of BankruptcyA bankruptcy can wipe out a large amount of accumulated debt. Debts such as car loans, payday loans, personal loans, back taxes, delinquent student loans, certain installment loans, the list is endless. If you have equity in your home, you could possibly avoids a foreclosure and keep your home. Your debt ratios are reducedSince the bills are being eliminated and your open accounts are being eliminated, this should drastically reduce your open and overdue debts. Your debt ratios are reduced since additional debts are no longer being paid on.What Bankruptcy does for you is give you a clear start. And there is a flip side to having this “fresh start”. There are many things you will no longer be able to buy because of the damage to your credit report. But in the end, you will have a better financial picture. Your attorney will explain this to you. In order to “establish your credit worthiness” you must have a good credit and good reason for needing to file a bankruptcy.

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Cons of BankruptcyThere are downsides to filing bankruptcy. Your credit report will report this bankruptcy filing for 10 years thereby lowering your credit score. It is possible to repair this after the bankruptcy is removed from your report, but you will need an understanding of the credit reporting agencies practices. When you file the bankruptcy, your home may go into foreclosure. This in itself probably won’t affect you but it won’t solve the problem if you have a family that relies upon your equity to pay for the necessities of life ( bread and obscurity).

Bankruptcy does have an advantage on your car and trade as well. If you need a car and would trade your car for something more economical, then you may also consider filing bankruptcy. Since Chapter 7 bankruptcy completely cancels out your car payments, you may be able to purchase a more economical used vehicle given the help of an attorney. On the other hand, you won’t be able to file Chapter 7 bankruptcy again until 5 years after you discharge your bankruptcy.

Chapter 13 bankruptcy does literally nothing for your car except to require you to follow a 3-5 year payment term to repay your car loan. Since this shows your car actually paid off, it most likely will not affect your home. Your attorney will help you find out the Trade Humanats applicable for your case. Usually, an attorney can tell you how much of your gross monthly payment you can afford to pay. They will say this is based upon your monthly household income, the size of your family, other debts, etc.

Both of the Bankruptcy Chapters are a financial alternative to discharging your debt and starting an fresh financial life. Both give a new start. Both also eliminate the stress from your life and perhaps some of your family members as well. But they do have negative effects. Bankruptcy shall bring out the two effects of Chapter 7 and Chapter 13 bankruptcy in the least amount of time. However, the free ride will last a long time.