When debt is overwhelming, the situation might make you feel like you don't have anywhere to turn. Most people who are drowning in debt do have the option to file for bankruptcy.
While bankruptcy is something that some people see as the easy way out, this isn't the case. Bankruptcy isn't defeat. It is simply realizing that you simply can't overcome your current financial situation and taking action to start anew. If you are thinking about filing for bankruptcy, make sure you remember these benefits.
#1: Automatic stay
Filing bankruptcy comes with the issuance of an automatic stay. This prevents bill collectors from being able to call you, send you collection demands or contact you in an effort to collect the debt. It only applies to creditors who are included in the bankruptcy, so student loan collectors and child support agencies don't have to comply. The automatic stay is one of the first things that happens with bankruptcy that can make your life a little less stressful.
#2: Debt counseling
As part of the bankruptcy, you will go through credit counseling. Learning the tactics that are included in this can help you to avoid getting into debt after the bankruptcy finishes. If you file for Chapter 13 bankruptcy, you will get a plan for repaying your debts through the bankruptcy trustee. This can help you learn how to practice good payment practices.
#3: Financial planning
You will also learn some financial planning tips and strategies that can help you keep your finances on track. Some of the classes that you go through include budgeting help so you can prepare a budget that will help you to keep control of your money in the future.
#4: Chance to rebuild credit
Once the bankruptcy finishes, you can work on rebuilding your credit history. You can do this, but remember that it will take time to make it happen. The strategy that you use for this varies depending on your circumstances. Make sure that you take the time to think carefully about how much credit you actually need. You don't want to get back into a dire financial situation again.
#5: Stress relief and a fresh start
Bankruptcy is a good opportunity to get a fresh start. You will likely notice that you can sleep better at night once you have taken steps that help you to take care of your debt. Before you make the decision, make sure you understand exactly how filing will impact you now and into the future. Chapter 7 bankruptcy is a bit different from Chapter 13 bankruptcy, so consider the points that apply to each.
Source: Nov. 30, -0001