Compounding debt often forces people to file for bankruptcy. With debt collectors hounding, the stress of it all can take its toll. Filing for bankruptcy may seem like the light at the end of an emotional and devastating tunnel, and it can be for some people. It can stop the harassing phone calls from collection agencies, repossessions, wage garnishment and foreclosures. Is filing for bankruptcy the right choice for you? Here are four reasons why you shouldn’t declare bankruptcy.
1. Filing For Bankruptcy is Bad For Your Credit Score
Filing for bankruptcy will damage your credit score and force you to work hard to rebuild it. Every single account attached to the bankruptcy will appear on your credit report and remain there for some seven years. There is no established figure for how much your credit score will be lowered, but generally speaking, your score can take a hit of up to 150 points if you have a decent credit score. For creditors who you may be looking to work with in the future, you are a high-risk candidate for any kind of financial assistance, from a line of credit to loans. Still, it is not uncommon for a credit score to climb within twelve months of filing for bankruptcy. Visit NY-Bankruptcy.com/bohemia to seek representation if you’re being sued or thinking about declaring bankruptcy.
2. Collection Agencies Rarely Sue
While collection agencies call day in and day out, it is unlikely that they’ll sue to collect on a debt. Creditors send the accounts that they don’t want to sue to a collection agency and pursue the one that they want to sue on their own. The debt is usually considerably high if a creditor or collection agency decides to sue. Your odds of being sued is low if your debt is less than a $1,000, you are “judgement proof,” meaning that you have limited assets for a creditor to seize when debt repayment is required by a court and your debt is old. A collection agency may work with you to reduce the amount owed.
3. You Could Lose Assets
Filing Chapter 7 bankruptcy, in particular, can be a risky move because you put yourself in a position to lose assets. If your assets are not protected under a certain exemption law when you file Chapter 7 bankruptcy, they can be sold so that creditors can receive their payment. It might not be worth it to file bankruptcy if there is a chance you can lose assets.
4. Just Started a Higher Paying Job
Income is a significant factor when it comes to getting the means test for qualification for Chapter 7 bankruptcy. The means test takes into account your average income over the course of six months, and the higher your income, the greater the potential to fail the means test. With a new job that pays more, every month, your means test average income climbs the longer you hold off filing. You can delay declaring bankruptcy if you have a chance to improve your finances and pay your debts with a new, higher paying job.
Declaring bankruptcy shouldn’t be taken lightly because it’s a big decision that can have significant implications. Though the bills may be piling up and collection agencies are constantly calling, you should think long and hard before filing for bankruptcy of any kind. Your unique financial situation should be taken into consideration when trying to make a decision about bankruptcy. Still, declaring bankruptcy may not be the best move for you. Speak to a bankruptcy attorney that can meticulously assess your debt situation and offer advice on whether to declare bankruptcy or not.