What Are the Benefits of Bankruptcy?
Though filing bankruptcy is often seen as a negative, the benefits of bankruptcy can be surprising. While bankruptcy is not the answer for everyone facing debt, many who are overwhelmed and unable to pay their debt can benefit from it. For starters, many stressors can be reduced or even completely eliminated by filing for bankruptcy. If you are under a mountain of debt and are constantly being harassed by debt collectors, filing for bankruptcy puts an immediate and legal hold on your debt, meaning creditors can no longer harass you about it. This is called an “automatic stay” and is one of the first things that is done during a bankruptcy. While stopping harassing telephone calls and site visits is important, the main benefit of bankruptcy is to give debtors a clean slate to rebuild their credit. As the bankruptcy process progresses, the debtor will choose which bankruptcy option is the best for his or her situation. There are two main options:
- Chapter 7 – This type of bankruptcy discharges many debts, including credit card debt, utility bills, personal loans and other unsecured debt. Some possessions may be sold to pay creditors, but many assets may be exempted, including your house and car.
- Chapter 13 – This type of bankruptcy reorganizes your debt so it can be paid off over a three- to five-year period. Payments are manageable because they are based on your personal financial condition and intended to help you pay back some debt while rebuilding your credit. After the designated period, any remaining debt will be discharged.
The main benefit of filing for bankruptcy is freedom from your overwhelming debt. You will get a fresh start and the ability to move forward with your life. Though bankruptcy will remain on your credit score for seven to 10 years, your debts will be discharged and/or paid back, leaving you free from debt. Eventually you will be able to apply for new credit cards or finance larger purchases, like a car or home. Debt can be extremely overwhelming and is often not the fault of the debtor. Many who file for bankruptcy do so not from frivolous spending but as a result of serious life problems like divorce, medical issues and loss of employment. If you are deciding if bankruptcy is the right option for you, speak with an experienced and knowledgeable bankruptcy attorney like those at the Oswalt Law Group in Phoenix. We can take a look at your specific situation and help you determine if bankruptcy is the right option for you. We can also explain the benefits you can experience when you choose bankruptcy, including removing the burden of debt from your life. Give us a call today and we can help you get started on building a debt-free future.