The bankruptcy process is full of benefits when the time is right. While it isn’t for everyone there are many advantages that it can provide the right person. A quick glance at the pros and cons of filing for bankruptcy can help identify why the process isn’t always the solution for every situation.
The most obvious advantage to filing for bankruptcy is debt relief. However, bankruptcy doesn’t just allow a debtor to resolve debts and get out of delinquency, it also stops creditors from making contact or collection efforts in the meantime. It essentially freezes debt collection practices and requires that creditors follow and accept the terms of the bankruptcy.
Certain debts, such as mortgages and car loans, can be resolved easier in bankruptcy without the worry of losing the asset to foreclosure or repossession. While not all assets are guaranteed protection, most debtors find that their assets are far more protected from creditors in bankruptcy than in other debt relief solutions.
The main point of concern when filing for bankruptcy is whether it truly is the best solution. Bankruptcy should never be pursued as the first line of defense against debt, especially not without consulting a bankruptcy attorney first. The reason is that one might be able to negotiate their debts directly without the need for the more involved process of bankruptcy.
There are also considerations with qualification or eligibility. Not everyone will qualify for bankruptcy, especially Chapter 7. It is a better idea to ensure qualification before filing the paperwork. If a debtor does not meet income restrictions, has disqualified debts or has filed within the last few years, they may find that they are not eligible for bankruptcy in the first place.