Many people think bankruptcy is an overwhelming process with painful consequences. Many debtors are reluctant to even consider it as an option. While bankruptcy comes with some downsides, and it is certainly not appropriate for every financial situation, it does provide a fresh financial start. With the ability to reestablish good credit history, many debtors find themselves in much better financial health after successfully discharging debts in bankruptcy. Read on to learn more about the pros and cons of filing for bankruptcy and what other financial options a St. Louis bankruptcy attorney can help you access to take charge of your future.
As with everything in life, there are pros and cons to filing for bankruptcy. A Chapter 7 bankruptcy stays on the public record for ten years. All other bankruptcy references are only in the public record for seven years. Many debtors believe that this will prevent them from accessing any credit. While creditors do take this into account, credit scores consist of other components—which bankruptcy can actually improve. For example, the amount of a person’s debt burden is nearly one-third of an overall credit score. Because bankruptcy legally discharges debts, bankruptcy improves the debt burden factored into credit scores. Payment history is an even greater portion of the score, and this, too, bankruptcy can improve. While bankruptcy cannot erase negative payment history, it can allow debtors to begin establishing positive payment histories on other lines of credit.
Many debtors also worry that a bankruptcy court will seize their assets. While bankruptcy courts have the authority to do so, bankruptcy courts generally seize assets in cases that involve opulent purchases that vastly exceed the allowable number of bankruptcy exemptions. This is what happened to celebrities such as M.C. Hammer, who filed for bankruptcy while in possession of a $30 million estate with gold-plated gates and Italian marble floors. Most debtors, however, can protect their assets by applying exemptions, and will know what assets will be protected before filing a bankruptcy petition.
For situations in which bankruptcy is not appropriate, you have other options available for debt relief. You can consolidate your debts by paying off high-interest loans with a single loan at a lower interest rate. In some cases, you can negotiate credit card debt with a creditor in lieu of filing for bankruptcy. Because bankruptcy generally leaves a credit card company with nothing, many companies are willing to accept pennies on the dollar to mitigate their losses.
Debt can plague a person for years to come—but you have many legal options for managing debt and changing your entire financial situation. Experienced Missouri attorney Kenneth P. Carp can help determine what financial options are right for your particular situation. Call (636) 947-3600 or contact us online to schedule your consultation. With the right financial options, you can improve your credit score and financial health for years to come.