Hello, my name is Laura Zaro and I’m a bankruptcy attorney at Zaro Law. One of the most common questions I get from clients is regarding the pros and cons of
filing bankruptcy. First for the pros- Bankruptcy typically wipes out all of your
unsecured debt. So that’s credit card bills, medical bills, collections, personal loans, vehicle deficiencies. All of that is typically wiped out in a bankruptcy. Some debts, like student loans are not wiped out and I’ll discuss that a little bit more later in the video. Another benefit of filing bankruptcy is that
when the case is filed, there’s an automatic stay that goes into place that immediately stops all creditor
harassment. Meaning creditors can no longer contact you, collect from you, garnish you; they have to leave you alone at that point. Another benefit of filing bankruptcy is that
it typically will help improve your credit score. The reason for that is that a large part of
your credit score is determined by your debt-to-limit ratio. That is the total amount of credit being used compared to the total amount of credit available. So after your bankruptcy is discharged, the balances owing on those unsecured debts will start
to show as zero and that alone will help improve your score. Also if you have payments showing up as delinquent on your credit report now, after the bankruptcy they will show up as discharged or included in bankruptcy. And again, that alone will help improve your score. Transitioning into the cons- First, is just that your score may take a little bit of a hit when the bankruptcy is first filed. Some people may already have a credit score that’s low, so just know that it may go down a little bit more but keep in mind in the weeks and months after the case is filed, your score should start to improve. Another con of filing bankruptcy is that I do strongly advise that you file with a bankruptcy attorney, which costs money. And really for most clients I know that’s a huge concern. I just would say don’t let that deter you from at least going through a free consultation and just finding out what your options are. Again, it doesn’t hurt at all to find out what options are out there. Give our office a call; we provide free consultations and have payment plans for our attorney fees. Another downside of filing bankruptcy is that some debts are not discharged. As I mentioned, student loans are not discharged. And then keep in mind that traffic tickets are not discharged in a chapter 7 bankruptcy. However, they can be discharged in a chapter 13 bankruptcy if they are non-criminal traffic tickets or infractions. Again can typically be wiped out in chapter 13. I’m not gonna elaborate on that any more today, but call our office if you have questions about that. Also tax debt is typically not wiped out in a bankruptcy but in some instances we can wipe out older taxes. Again, I’m not going to elaborate on that more, but call our office if you have questions about that. Finally, the last con is just that some people may need to file a chapter 13 bankruptcy and pay back some of their unsecured creditors. That is again what’s called a repayment plan and typically applies to people who make above median or above average income, or have assets with a lot of equity in them. Really when that is the case, we do a chapter 13 and the payment is typically based on your income so it’s pretty reasonable. I’m not going to elaborate on that any more now, but just know that some unsecured creditors may get paid back if you make pretty good money. Other than that, that’s pretty much the pros and cons of filing bankruptcy. We’ll do more videos answering other common questions. Feel free to take a look at our website with other frequently asked questions on there with some answers and of course feel free to call our office or email us if you have any questions or want a free consultation.