What are the advantages and disadvantages of bankruptcy?

Bankruptcy offers a break from creditors. A significant advantage of bankruptcy is that it provides both temporary and permanent relief from creditors. An “automatic stay” prevents them from attempting to collect money from you while the bankruptcy is pending and provides temporary protection from foreclosure, eviction and car repossession.

What happens if a creditor goes bankrupt?

Creditors still have an opportunity for repayment with the bankruptcy process. Bankruptcy is handled in federal courts, and rules are outlined in the U.S. Bankruptcy Code. A bankruptcy will stay on your credit reports for a number of years, making it more difficult to borrow in the future.

What are the benefits of bankruptcy?

One of the largest benefits of bankruptcy is that you could be legally cleared of responsibility for your debt. On top of that, it could potentially prevent any future legal trouble related to the nonpayment of that debt. Keep in mind that not all debts are dischargeable, but most forms of unsecured consumer debt can be wiped out in bankruptcy.