Question

What are the advantages and disadvantages of filing Bankruptcy? Under what circumstances do you feel it is OK to file and why?

Also, address how you can improve credit and the steps to take to improve credit standing.

Answer 1

Advantages and disadvantages of filing Bankruptcy

Declaring bankruptcy allows individuals or businesses to resolve their financial obligations and to rebuild their credit. bankruptcy has advantages and disadvantages.

Advantages

• Filing for bankruptcy will help to prevent creditors from taking actions like repossessing property.
• Debtors declaring personal bankruptcy have to undergone credit counseling. This will educate them to rebuild their credit.
• Debtors may avail some bankruptcy exemptions which will save them from losing their property.
• After filing for bankruptcy, debtors will begin improving their credit rating and follow new financial habits.

Disadvantages

some of your property may be seized by the bankruptcy court and sold to pay your creditors.

• The bankruptcy will be noted on the credit report for 7-10 years.
• All the credit cards will be cancelled after filing bankruptcy
• Bankruptcy filing will hinder from obtaining a mortgage or loan for many years.
• After filing for bankruptcy, tax refunds from governments may be denied

When to File for Bankruptcy?

When an individual or business have large debts that are not easy to repay, and in the danger of foreclosure, or when they are being harassed by the creditors, bankruptcy can be filed.

Steps to be taken to improve credit standing

By following financial discipline and good financial habits, the credit standing can be improved. The following steps may be taken to improve credit standing.

• Manage the credits and pay bills on time
• Keep the balances on credit cards, Low
• Open credit accounts only if needed and apply only required credit
• Review the credit reports and dispute any discrepancies
• Periodically monitor the credit transactions