Are you thinking of filing for bankruptcy? That may be the question you find yourself asking like I did several years ago, but one that is ultimately hard to answer. If mounting credit card bills are threatening to pull you under, you may be considering bankruptcy as a way to start over. Filing can also help protect essential assets you and your family need to maintain your current quality of life. However, you also want to keep in mind that bankruptcy comes with severe consequences for your credit profile. There are two types of bankruptcy: Chapter 7 and Chapter 13. With Chapter 7, you need to have little-to-no disposable income. You will have to pass a means test to prove that you cannot afford to pay your debt to file. Chapter 13 is a bankruptcy option to look at if you own property that you want to keep. In many cases, it will be in your best interest to hire a bankruptcy lawyer to handle your bankruptcy. Why People File for Bankruptcy Filing for bankruptcy is a significant decision. Doing so can stop a foreclosure or let you discharge your debt, but it also comes with a variety of financial setbacks that you will need to consider. There are many different reasons someone may consider filing for bankruptcy. A study reported that 46% of bankruptcies were filed because of medical debt. Another 15% of people who file do so because of poor financial decisions they have made in the past. These decisions may include paying off one credit card with another or putting everyday necessities on the card. The average filer is married, graduated high school, and makes $30,000 per year or less. However, bankruptcy affects people of all age groups and classes. Common reasons people resort to bankruptcy include: The bank is foreclosing on their home Their lender wants to repossess their car They have moved to a location with less favorable exemptions They are being evicted They want to stop a lawsuit They have made poor decisions with their credit card usage They are already working two or more jobs Their wages will be garnished Their life is drastically affected by debt-related stress They have tried all alternative methods to resolve debt If you are considering bankruptcy as a way out, we listed some pros and cons to filing for bankruptcy. Pros of Filing for Bankruptcy It stops collection calls from harassing you The bankruptcy process protects you from collection agencies by creating an automatic stay, a legal injunction that prevents any collection as soon as you file a bankruptcy petition. Discharge your debt If you have been unable to pay your bills, you may be able to have these debts legally waived. Otherwise, you can file for Chapter 13, which allows you to reorganize your debts and consolidate them into a single monthly payment. This can make repayment much more affordable and manageable. Your debt is gone with Chapter 7 bankruptcy You do not have to repay a collections agency or lender after bankruptcy. You may be able to sleep better at night, knowing the financial burdens of debt is gone. Under Chapter 13, you do have a payment plan. It allows you to regroup No matter what type of bankruptcy you’re filing for, doing so can alleviate financial stress. This will enable you to regroup and focus on developing a new path forward without your debt looming overhead. Maintain your life It is no doubt that filing for bankruptcy can feel embarrassing. However, it allows you to maintain your life and protects you from losing your home, car, or other essential assets to you and your family. With your assets safe, you can continue being productive and working on getting yourself back on the right track. Cons of Filing for Bankruptcy Adverse effects on a credit card A bankruptcy will appear on your credit report for up to ten years. However, this depends on your credit report before filing for bankruptcy. If your credit was very poor to begin with, then a bankruptcy filing will not have a huge impact. If your credit were good, a bankruptcy on your credit report would cause a sharp drop in your credit score. You will not get another loan any time soon With a bankruptcy on your credit report, you will have to wait a bit before you can qualify for a mortgage or car loan. So when you do qualify, you will likely pay higher interest and fees on the loan. You can not discharge every debt Though filing for bankruptcy will help alleviate financial struggle, not all types of debt can be discharged. Examples of debts that generally cannot be included in bankruptcy are student loans, recent tax debts, child support, and alimony. Filing is an ongoing process Not only is bankruptcy a major decision, but it is also a long and complicated process. After filing, bankruptcy requires specific tasks, and some types will require ongoing payments. Relief may also be rescinded if you inherit money or begin making a significant profit. Certain tasks may become more difficult When you file for bankruptcy, you have to give up your credit cards. This means booking a hotel or car rental may become more challenging, as many companies require a credit card to have on file. You will also need to adjust your spending habits overall, which can be challenging at first. Every bankruptcy situation is different. In some cases, there are more pros or more cons, depending on your case. Before filing, be sure to consider all aspects of bankruptcy to ensure it is the best choice for you and your family. Though it can feel like admitting defeat, it can potentially save your quality of life. A bankruptcy lawyer can also be of great assistance when you have decided to file. Overall, bankruptcy is not something to be entirely feared. It is a tough process that can offer a very positive result: your financial freedom and peace of mind.