How do I learn about the pros-and-cons of bankruptcy?
Perhaps the single most important financial decision a person will ever make is
whether or not to file for bankruptcy. Because of this importance, a decision
should always be made with the advice of an experienced bankruptcy attorney.
Many attorneys will provide an initial consultation free of charge. The
individual can then make an informed decision of whether to file for bankruptcy,
so it is critical that the attorney be skilled in gathering the necessary
information in order to be able to provide the best professional advice.
Every initial consultation with a prospective client should cover each of the
following areas:
- Nature of client’s financial problems.
- Nature of client’s debts.
- Nature of client’s assets.
- Client’s current income and earning capacity.
- Client’s current expenses.
- Review of all pertinent documents.
Once all the information is gathered, the attorney should consider the client’s
entire financial picture in making recommendations. Included among those
“big picture” considerations are:
- The nature of the assets the debtor wishes to protect.
- Whether or not a spouse’s financial interests will be affected.
- The nature of the exempt assets that can be protected under state law.
What is the biggest disadvantage of bankruptcy?
Perhaps the most well-known disadvantage of bankruptcy is that it
remains on a person’s credit history for up to ten years. By the time a client
comes in for a consultation, however, his or her credit rating may already be
significantly damaged because of a history of late payments, too much debt,
reported lawsuits, or judgment liens.
This bankruptcy “disadvantage” on your
credit record can turn into an advantage over a short period of time in that an
individual’s debt-to-income ratio is substantially improved by bankruptcy,
therefore allowing some credit companies to issue secured credit or even
unsecured credit again.