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Advantages, Disadvantages and Myths About Bankruptcy

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The decision to file for relief from one’s debt under our Federal Bankruptcy protection laws may prove to be the single most advantageous financial decision you will ever make in your life.

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Yes, there are many powerful and life changing advantages to seeking Bankruptcy protection. Those advantages however do come with some negative consequences. Ultimately, you will need to understand and weigh the balance of those advantages against the disadvantageswhen making your final decision.

 

Advantages

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  • Protects the equity in your home from attachment by your creditors (up to a legal limit)

  • Allows you to reaffirm on your home and car loans and keep those items moving forward

  • Allows you to get caught up on past due home and car loan payments in an amount you can afford

  • Immediately stops lawsuits and home foreclosures

  • Stops interest, late fees and over limit fees on credit cards

  • May allow for reinstatement of a driver’s license suspended following an uninsured accident

  • Discharges your personal responsibility for unsecured debt

  • Silences harassing creditor collection calls & letters

  • Allows peace of mind moving forward

  • Permits a "fresh start" toward financial freedom

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Disadvantages

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  • A bankruptcy stays on your credit report for up to 10 years

  • Mortgage lenders in the future may require a larger down-payment

  • Auto lenders may charge a higher interest rate

  • Chapter 7 bankruptcies are considered "newsworthy" by the media so your name may be published in the newspaper

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Myths

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  • Filing for bankruptcy is a sin

  • I’ll be required to surrender my house and car

  • I can choose which creditors I want to include in my bankruptcy and keeping paying the ones I don't want to include

  • I'll never get credit again

  • My employer gets notice of my bankruptcy

  • My employer can fire me for filing bankruptcy

  • If I'm married my spouse has to file too

  • In order to keep my car and other favorite items, I should transfer them to a family member or friend

  • All my debts are wiped out in my bankruptcy

  • You can't get rid of past due income taxes in a bankruptcy

  • I can take out a payday loan to pay my bankruptcy attorney and have that debt discharged

  • I can keep using my credit cards up to the day before filing in bankruptcy

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