Understanding the Short and Long Term Effects of Filing Bankruptcy
Undergoing immense financial hardship can significantly affect a person’s overall well-being. Aside from struggling to keep up with necessary bills, a person who has found themselves in serious debt may also suffer mentally. If you feel helpless as you try to understand how to dig yourself out from under the debt you are in, one option you may consider is filing bankruptcy. However, with any major financial decision, it is vital that you understand the short and long-term effects of filing bankruptcy.
The Law Offices of Daryl L. Jones, P.A, is a Florida real estate law firm with over eight years experience assisting clients who are considering filing bankruptcy. Bankruptcy can offer relief and challenges, so it is important that individuals weigh the pros and cons to understand whether this path is best for their current and future financial situation.
The Short-Term Impact of Filing Bankruptcy
There are many reasons a person may find themselves in unmanageable debt. Some examples include:
- Job loss
- Death of the primary financial provider in a family
- Costly medical bills that must be paid
Regardless of why you are struggling financially, those facing heavy debts commonly file Chapter 7 or Chapter 13 bankruptcy. When filing Chapter 7 bankruptcy, your debts will be erased. However, in order to pay off these debts, consumers often lose valuable assets as a result.
Chapter 13 bankruptcy allows a judge to establish a viable, monthly repayment plan where you can pay back some or all of your debts. In this case, you will stop receiving the nagging calls from collection agencies as long as you can keep your payments current. Some of your creditors may even forgive a portion of your debt if you are able to show progress in paying your monthly payments.
What Are the Long-Term Impacts of Filing Bankruptcy?
While bankruptcy is a great option to relieve the stress of financial hardship, there are long-term impacts that you should be aware of before you choose to proceed. After filing bankruptcy, you may need to live primarily as a cash consumer with limited access to credit. In other words, if you do not have the actual cash to purchase a product or service, you will not be able to buy it.
While this may be worrisome for individuals considering bankruptcy, it should be viewed as an opportunity to work on their financial management skills. Because bankruptcy leaves consumers with a clean slate, it is a chance to learn how to better manage the money you do have while building your credit.
Your credit will take a significant hit due to filing bankruptcy, so if you know that an employer or new landlord may check your credit report, it may be worthwhile to consider filing a letter with credit agencies explaining the circumstances leading to your bankruptcy filing. If you are unsure what to include in your letter, you should consult an experienced bankruptcy attorney.
Get Help From a Florida Bankruptcy Attorney
Struggling with immense amounts of debt can be frightening. When you feel there is no way out of the debt, bankruptcy may be the solution to offer you the relief you need.
Attorney Aimee Melich of The Law Offices of Daryl L. Jones, P.A, has over eight years experience helping clients in South Florida who are considering filing bankruptcy. Our law firm is dedicated to providing outstanding legal services, and we will communicate with you through every step of the process. To schedule a free initial strategy session, fill out our contact form or call 305-969-3602.