Though known mostly for his six wives, England’s Henry VIII was the first government leader to enact bankruptcy laws. In Tudor times, bankruptcy was a way for creditors to collect debts from traders; when charged, debtors were forced to relinquish all their belongings…and were then thrown in prison. (Talk about adding insult to injury!) Thankfully, laws have progressed, and now, filing for bankruptcy has become a viable solution for those who find themselves in a severe financial tangle.

Filing for protection has its pros and cons. Bankruptcy is not an easy-out; it’s important to be aware of, and prepared for, the negative impact declaring will have on your life and finances. That being said, while the drawbacks are considerable, for many, the benefits of bankruptcy outweigh the negatives.

CONS

Bankruptcy Con #1: Don’t Discount Stress
The emotional stress caused by bankruptcies should not to be taken lightly. Debtors who opt for bankruptcy are often plagued by feelings of alienation, shame and guilt. If others will learn of your circumstances, prepare yourself for the emotional baggage that accompanies public judgment.

Bankruptcy Con #1: Bye-Bye, Credit! (For at least 7 Years)
The worst thing about filing for bankruptcy: it severely damages your credit rating…for 7, or more, years. Most financers won’t even entertain the thought of loaning you money, and those that do are going to charge an unconscionable amount of interest.

PROS

Bankruptcy Pro #1: Hello, Fresh Start!
To err is human. 95% of individuals find themselves in a difficult financial situation at least once in their lifetime. Filing for bankruptcy is a way to wipe the slate clean and unload years of debilitating debt. For many, declaring bankruptcy is often the first step down the right path.

Bankruptcy Pro #1: Sayonara, Credit Collectors!
Imagine if every time the phone rang your heart, or stomach, didn’t sink. The immediate relief from creditors’ constant hounding can be significant. When the phones stop ringing, it gives you a chance to catch your breath, take stock, and put together a responsible plan.

Bankruptcy Pro #1: Property Pluses
The question of property can be tricky in a bankruptcy case. As a general rule, however, claimants can keep all property acquired after the date of filing. In some cases, debtors can even keep their homes.

Be honest with yourself: would a little belt-tightening go a long way in paying down your current debts? If so, it’s best to downsize your life, pay off your debts, and avoid filing for bankruptcy. However, if your situation is dire, bankruptcy may prove to be the financially responsible option.