Bankruptcy is something no one wants to face, but most people don’t want to struggle, either. Sometimes, we find ourselves in dire straits, and we just need a little help and a fresh start.

Bankruptcy helps consumers emerge from debt, whether it’s caused by credit cards, medical bills, or divorce. Read on to learn about the benefits and drawbacks of consumer bankruptcy.

Benefit: The Automatic Stay

A client who files for a credit card bankruptcy will likely feel relieved. As soon as the case is filed, an injunction called an automatic stay goes into effect. The automatic stay prevents creditors from making further collection attempts.

Once it’s in place, creditors cannot send letters, call, or ask for payment until the case has concluded. If the debt is discharged via Chapter 7 bankruptcy, they cannot contact you for that debt ever again. With the automatic stay, you’ll get the breathing room you’ll need to think clearly and make smarter financial decisions in the future.

Benefit: A Higher Credit Score

Some clients may see increases in their credit scores after receiving a bankruptcy discharge. Though it’s not guaranteed, it happens occasionally, because of changes in debt-to-income ratio. Before filing for bankruptcy, your ratio may be debt-heavy.

However, when you get a Chapter 7 discharge, those debts are eliminated. No matter your income, your debt-to-income ratio will improve, and the credit bureaus tend to look favorably upon those with a low debt-to-income ratio. Everything takes time, but after a discharge, you can concentrate on rebuilding credit rather than living from one paycheck to the next.

Drawback: Guilt and Shame

A bankruptcy declaration does not come without repercussions. However, most of them are short-term and they’re easy to overcome. Many people feel guilty because bankruptcy allows them to ‘avoid’ paying their debts, but these feelings are perfectly normal. It’s important to focus on financial recovery, and to do what’s best for yourself and your family.

Drawback: Credit Consequences

A bankruptcy will stay on your credit report for up to a decade. While that’s a frightening thought, it’s not as bad as it seems. Your credit might improve after filing, and you’ll probably receive offers for new credit products such as credit cards and auto loans. We advise clients to stay away from such offers right after bankruptcy, as they often come with abnormally high interest rates. There are ways to improve your credit without the high fees, and your lawyer may be able to help point you in the right direction.

Drawback: Fear of Losing Your Assets

Most people are reluctant to file for bankruptcy because they believe they’ll lose their vehicle, house, and other valuables. Despite this common misconception, most clients don’t lose much when filing for bankruptcy. Ask an attorney about state and federal bankruptcy exemptions that will help you keep more of your hard-earned money and assets.

A Few Closing Thoughts About Bankruptcy

Like any other major life choice, bankruptcy has its pros and cons. The decision to request bankruptcy protection is a highly personal one, and you’re the only one who knows whether it’s right for you and your situation. Lawyers will be able to answer your questions and address your concerns, and if you decide to move forward, they’ll stay by your side through the process.