In Michigan and beyond, financial crises have been on the rise in recent years. For some, a key factor to restoring stability lies in filing for bankruptcy. There are pros and cons to such programs, which every individual should consider before filing for protection.
Because each type of bankruptcy carries its own eligibility requirements, filersmust first determine which program best fits their needs. For example, if someone has lost a job or experienced a substantial reduction of income, Chapter 7 might be a better option than Chapter 13, which requires a filer to demonstrate proof of consistent and reliable income. Across the board in all bankruptcy programs, there are benefits and downsides to filing for this form of debt relief.
Bankruptcy gets added to a person’s credit report and remains there for up to 10 years. While there are ways to build back credit, it’s important to know that Chapter 7 remains on a credit report for 10 years and Chapter 13 for seven years. Another potential downside to using these debt relief programs is that valuable assets may be lost in the process, especially under Chapter 7, which often includes the liquidation of assets, the proceeds of which are then used to pay back lenders; however, there are exemptions that may help a filer to avoid liquidation of some or all of the bankruptcy estate. Finally, there are certain debts that are not removable, even after filing for bankruptcy, such as child support or a student loan.
The pros usually outweigh the cons
Despite potential downsides to filing for bankruptcy in a federal court in Michigan, these programs are highly beneficial when a person is overwhelmed by a financial crisis and needs a way to start fresh. Using this type of debt relief not only alleviates debt but also provides a clear path to rebuild finances in the future. Filing for bankruptcy also results in an automatic stay against all collection activities (including foreclosures), which may help someone keep from losing his or her home and stops creditor harassment in its tracks. A bankruptcy attorney can provide guidance and support to anyone considering filing a petition.