Many people believe that filing for bankruptcy worsens their financial position. However, this is not entirely true. While it is true that bankruptcy affects a person’s finances for some future years, in many cases, filing is the next best option. Here’s why:
Suspension of debt collection
Once you file for bankruptcy, the court automatically issues a stay against all creditors and debt collection proceedings. While this does not mean that your debt is canceled, it gives you some time to sort out all your debt before the bankruptcy case is deemed complete or till the stay is lifted.
In cases where debt collection is suspended, your debt collectors cannot call you or send you letters. There can be no lawsuits on the debts that you owe. You do not have to face any more wage garnishments, home mortgage foreclosures, and property repossession.
During the time that the court suspends your debt, if any creditor contacts you, your attorney has the right to bring a contempt of court action against them. This means that the court can penalize them for approaching you, stop them from their debt collection attempts, or make them pay for any inconvenience caused.
However, keep in mind that an automatic stay order does not mean you can stop criminal proceedings, government tax audits, modifying, collecting, or establishment of child support or alimony, the establishment of paternity, or co-debtors and co-signers. Moreover, if you have filed for bankruptcy only once in the past year, you can be eligible for an automatic stay. This does not apply if you have filed for bankruptcy twice or more in the past year.
Dischargeable debts are those that can be entirely eliminated by bankruptcy. When you file for bankruptcy, you can discharge, cancel, or overturn your responsibility to repay some debts based on your circumstances. These include credit card debt, medical and utility bills, and some personal loans.
Exempting an asset means that it will not get seized during bankruptcy. This applies to both Chapter 7 and Chapter 13 bankruptcy. While some exceptions protect a certain dollar amount of an asset, others cover the entire asset. Some exceptions may only apply to a set group of assets, such as a motor vehicle or wedding ring, while others can apply to other properties you own and do not wish to give up.
Most people do not file for bankruptcy because they worry about a tanked credit ranking. There is no denying that a bankruptcy filing leaves proof. It remains on your record for anywhere between seven to 10 years. However, many debtors have claimed that their credit scores actually improve after they file for bankruptcy.
This is because when your dischargeable debts are canceled, you can move forward in life with a clean slate. With some patience and hard work, you can slowly rebuild your credit and gain the confidence of the people around you.
Depending on your personal financial circumstances, bankruptcy may or may not be for you. To know more about your unique case, schedule a consultation today.