What Are the Pros and Cons of Filing for Bankruptcy?

 Posted on September 21, 2026 in Bankruptcy

Millions of Americans struggle with debt. In many cases, debts are necessary, and they can help us buy a home, vehicle, or education. Other debts may come about because of unforeseen financial difficulties, such as credit card balances that become impossible to repay after a job loss, divorce, or other financial setback.

If you have significant debt, you may be looking at your options, including the possibility of filing for bankruptcy. Bankruptcy can provide powerful relief, but it also has real drawbacks. It affects your credit, may put some property at risk, and requires you to make detailed financial disclosures to the bankruptcy court.

As you review your finances and consider the path ahead, it is important to understand both the potential benefits and the disadvantages of pursuing bankruptcy. Our Schertz, TX bankruptcy attorney is experienced and friendly and can walk you through whether filing for bankruptcy in 2026 makes sense for you.

What Are the Top Benefits of Filing for Bankruptcy?

While the primary reason to pursue bankruptcy is that it may allow you to eliminate or restructure your debts, there are several other important benefits.

• The automatic stay: When you file a bankruptcy petition, an order known as the automatic stay takes effect. In most cases, creditors must stop collection activity.This can provide some much-needed breathing room while you work through the bankruptcy process.
• Asset protection: In some cases, bankruptcy can help you keep important property. For example, if your auto lender is threatening repossession, a bankruptcy filing stops collection efforts and gives you an opportunity to manage the debt. 
• A quick discharge through Chapter 7: If you qualify for a Chapter 7 bankruptcy, many dischargeable debts can usually be eliminated within several months. 
• A structured repayment plan through Chapter 13: If you are trying to avoid foreclosure, catch up on secured debts, or keep property that could be at risk in Chapter 7, Chapter 13 bankruptcy may be a better fit. Chapter 13 allows those with regular income to propose a repayment plan lasting three to five years. 
• A clear endpoint for overwhelming debt: A successful bankruptcy gives you a defined legal process for dealing with debts rather than continuing the cycle of missed payments and collection activity.
• A chance to rebuild your finances: Bankruptcy does not erase every financial problem, but a discharge often removes enough unsecured debt to make your monthly budget workable again. 

What Are the Drawbacks of Filing for Bankruptcy?

Bankruptcy is a useful legal tool, but it is not free of consequences. Before filing, you should understand what you are giving up and what problems bankruptcy will not solve.

• Bankruptcy can affect your credit for years: Bankruptcy information may remain on a credit report for up to 10 years. That doesn’t mean you will be unable to borrow money for that long; people can and do get credit cards, auto loans, and mortgages after bankruptcy. However, you may face higher interest rates, larger required deposits, and lower credit limits.
• You may lose nonexempt property in Chapter 7: Chapter 7 is a liquidation bankruptcy. Texas Property Code Chapter 42 currently gives an exemption of up to $100,000 in personal property for a family and $50,000 for a single adult who is not a member of a family. But a trustee may sell property that is not protected by an applicable exemption and use the proceeds to pay creditors.
• Chapter 13 can require years of payments: Chapter 13 avoids some of the liquidation concerns associated with Chapter 7, but you pay for that flexibility with time and commitment. A Chapter 13 plan normally lasts three to five years. During that period, you must make the required plan payments and continue paying ongoing obligations that are not included in the plan.
• Bankruptcy does not eliminate every debt: A discharge can eliminate many unsecured debts, including many credit card balances and medical bills, but not all. Certain taxes, child and alimony payments, and student loans usually aren’t dischargeable. Secured debts also require separate analysis because a bankruptcy discharge generally eliminates personal liability without automatically eliminating a valid lien against the collateral.

Will Bankruptcy Stop Foreclosure, Repossession, and Creditor Lawsuits?

The automatic stay can stop or pause many collection actions once bankruptcy is filed. Chapter 13 can be especially useful for homeowners because it allows a debtor to catch up on past-due mortgage payments through a repayment plan while keeping the home.

However, the automatic stay is not a permanent free pass. If you want to keep a home or car, you need to tackle the underlying debt. A creditor may also ask the bankruptcy court for permission to move forward with collection in certain circumstances.

Is Chapter 7 or Chapter 13 Better?

Chapter 7 is a great option for many people because it is fast and doesn’t take a years-long repayment plan. However, eligibility rules apply, including the means test. Nonexempt property can potentially be sold to pay off debts.

Chapter 13 takes much longer, but it can allow you to keep property and pay debts through a court-approved plan. It may also be available to some people who do not qualify for Chapter 7 relief.

The right question is not, "Which bankruptcy is easiest?" but rather, "Which option best fits my situation?" Our bankruptcy attorney can help you answer that.

Should I File for Bankruptcy?

Bankruptcy makes sense when the benefits outweigh the costs, such as if you are:

• Drowning in credit card debt
• Facing lawsuits or garnishment
• Behind on secured debts
• Making payments without reducing what you owe

On the other hand, if your debt can realistically be repaid within a reasonable time frame, another strategy may make more sense.

You have fewer options if you wait until after your car is repossessed or your home is being foreclosed on to get legal advice. Call a bankruptcy attorney as soon as you fall behind on payments and know you can’t catch up.

Contact Our San Antonio Bankruptcy Attorney

At the Law Offices of Chance M. McGhee, we help you look at the entire picture before making a decision about whether you want to file for bankruptcy. To learn more about your options, contact our Schertz bankruptcy attorney with the Law Offices of Chance M. McGhee at 210-342-3400 to schedule a free consultation.