The Positive Side of Filing for Bankruptcy
The stigma of filing for bankruptcy has gradually disappeared. Most consumers want to pay their debts but unexpected things can happen—loss of a job, divorce, emergency medical bills—that result in an inability to pay off these debts. Once someone gets over the emotional stress of having to consider bankruptcy as a way out of uncontrollable debts, he or she can begin to see the positive side of filing for bankruptcy.
Some of the benefits of filing for bankruptcy include the following:
The Prevention or Stopping of Garnishment of Your Wages
Having your wages garnished from your paycheck would only add to your financial stress and could potentially cause embarrassment at work. Filing a Chapter 7 bankruptcy can permanently stop your wage garnishment.
The Prevention or Stopping of Repossession of Your Car
You need your car to go to work. Not having a car could negatively impact your job performance or your ability to keep your job or look for a new one.
The Delay of a Foreclosure on Your Home
If you are facing foreclosure, filing for bankruptcy will stall any foreclosure proceedings, giving you more time to catch up on your mortgage payments. The extra time may also allow you to get a loan modification, refinance your mortgage, or have a short sale of your home. The Mortgage Forgiveness Tax Relief Act of 2007 eliminates taxes on a debt that is forgiven by lenders in a short sale, a refinance, a loan modification, or a foreclosure. This is especially helpful for the many homeowners who are “underwater” on their mortgage payments, paying more than their homes are worth as a result of the bad housing market. A homeowner may be able to exclude up to $2 million of debt forgiveness for a principal residence.
The Automatic Stay of Collection Efforts by Creditors
Once you file for bankruptcy, there is an automatic stay from most attempts by creditors to collect on a debt. For example, a creditor can’t sue you for a debt you owe or a utility company can’t shut off your electricity, gas, or heat.
The Ability to Dispute Creditors’ Claims
Filing for bankruptcy gives you a chance to dispute any false or incorrect claims by creditors regarding the amount of debts you owe.
The Discharge of all or Most of Your Debts
When you complete the bankruptcy process, your debts will be discharged, allowing you to have a fresh financial start and take control of your finances. Corporations use bankruptcy to reorganize their debts and finances. You can, too. Keep in mind that not all debts are dischargeable in bankruptcy. These non-dischargeable debts include:
Liens and other secured debts will also survive bankruptcy because they are secured by some type of collateral. Also, Chapter 7 does not protect a co-signer from being responsible for a loan. However, Chapter 13 does protect a co-signer as long as the debtor’s bankruptcy plan is followed.
Steps to Take When Considering Bankruptcy
If you have been thinking about filing for bankruptcy, visit our resources page to learn about the entire bankruptcy process. Start Fresh Today also offers the required credit counseling and debtor education courses that you must complete before filing for bankruptcy and before your debts are discharged. These courses also help you learn how to better manage your finances after bankruptcy.
If you are not sure whether bankruptcy is the best option for you, consult with a consumer bankruptcy attorney. The bankruptcy attorney can review your financial situation and determine the best course of action for you to take so that you can get control of your debts. Use our free Attorney Locator to find one in your area.