| Cons |
Pros |
| Most tax debt is non-dischargeable. |
Bankruptcy can make old tax liabilities (older than three years) go away. |
| Bankruptcy will ruin your credit for some time to come. |
Missed debt payments, defaults, repossessions, and lawsuits will also hurt your credit, and may be more complicated to explain to a future lender than bankruptcy. |
| Declaring bankruptcy now might make it harder to do later if something worse comes along. |
Declaring bankruptcy now can get you started sooner on rebuilding your credit, and you can almost certainly get a Chapter 13 plan if there is another disaster before you are entitled to file another Chapter 7 case to liquidate your debts again. |
| Bankruptcy will not get rid of your student loan debt. |
Nothing will get rid of student loan debt, and at least bankruptcy will prevent your lenders from aggressive collection action. |
| You will lose all your credit cards. |
Your credit cards probably got you in this mess to start with, so it is hard to see that as a bad thing. In addition, it may be possible to salvage one or two if your lawyer recommends it. |
| Bankruptcy is an admission of defeat. |
Bankruptcy is facing reality, and it can allow you to have a new start. |
| Bankruptcy is an embarrassment. |
Harassing phone calls from creditors, dunning letters, repossessions, cancelled credit cards, declined charge authorizations, and lawsuits - they are all embarrassing as well. |
| Your name will be in the paper and in court records once you file. |
Your name will also certainly be in court records, and may be in the papers, if you are sued to collect a debt. |
| Bankruptcy will make it nearly impossible to get a mortgage, if you do not already have one. |
There are lenders who specialize in lending to "bad risks," although that is an unfair characterization to make of someone who has taken a major step to solve financial difficulties. |
| You may lose some of your luxury possessions. |
Most state exemptions allow you enough so that most things you own, particularly the things you need although not luxuries, will be exempt from bankruptcy, with plenty to spare. |
| You will have to explain to a judge or trustee how you got into a financial mess. |
Both judges and trustees have heard far worse stories than yours. |
