Are you up all night thinking about how you are going to pay off your debt? Are you behind on some bills, and the sound of your phone ringing is enough to give you anxiety attacks? Maybe it’s time for you to file for bankruptcy. Or is it?

The Pros and Cons of Filing for Bankruptcy

When should you file for bankruptcy?

When you are already drowning in medical bills and other types of debts despite exhausting all your efforts, you may have to consider filing for a bankruptcy. But sometimes just the thought of filing for bankruptcy can be scary and disruptive.

This is why, as a rule of thumb, it is always a better to pay off your debts as opposed to filing for bankruptcy. Because of the considerable impact bankruptcy can have on your personal and financial life, it should be viewed as a last resort. Before filing for bankruptcy, consider asking yourself the following questions first:

Have you sought help from a credit counseling agency?

Consider a credit counseling before filing. A reputable credit counseling agency can give you financial education, assess your financial situation, and help you find the best debt management plan to pay off debt. 

Have you tried negotiating with creditors?

Reach out to your creditors, and work on settling your debt before starting the bankruptcy process.

Is your paycheck being garnished?

If your paycheck isn’t being garnished, you could avoid it entirely (and avoid bankruptcy too) if you set up a debt management plan first.

Do you own assets?

You could lose these assets during a bankruptcy. Are they worth losing, or could you figure out a way to repay your debt instead?

Do you have other ways to earn money and pay off debt?

Extra income or living a more frugal lifestyle can go a long way in helping you repay your debt without going through bankruptcy.

The Pros of Bankruptcy

Filing for bankruptcy can be terrifying. But when used appropriately and at the right time, it can provide you peace of mind, save you money, and help you get a fresh start financially. Here are some pros to consider when you file for bankruptcy:

Stop calls from debt collectors

Declaring bankruptcy means you can get rid of harassing phone calls from your creditors and give you back your peace of mind.

Rebuild your credit

Filing for bankruptcy can help you get a fresh start to rebuild your credit. It can also give you the chance to regain your financial footing and can be a valuable learning experience that helps you become wiser about your future financial decisions.

Stop foreclosures and asset repossessions

If you’re in the middle of a foreclosure or having your assets seized, a bankruptcy will put a hold on foreclosures.

The Cons of Bankruptcy

While declaring bankruptcy can help "wipe out" your obligation to pay your debt, it also comes with serious implications. You could be negatively impacted for many years to come. That being the case, here are five downsides to filing for bankruptcy:

  • It is devastating to your credit history. A report of a bankruptcy can remain on your record for seven to 10 years
  • Filing for bankruptcy can be costly
  • The processes involved in filing for bankruptcy can be very time-consuming
  • Your bankruptcy filing will be public record. In addition, should you apply for another loan years later, denying a previous bankruptcy filing can put you on the hook for fraud violations and you can be prosecuted
  • Bankruptcies can be emotionally taxing. People who have filed for bankruptcy often feel like they are a failure and struggle with depression and loss of self-esteem


If you're overwhelmed and have exhausted all other options for debt repayment - bankruptcy might be the solution for you. However, before you file for bankruptcy, do your research. Understand the risks and benefits before deciding.

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