Bankruptcy remains one of the most affordable and quick ways to emerge from debt while putting a stop to debt collections and even maintaining property. Let’s take a closer look at each element of bankruptcy:
Eliminate Your Debts
The most clear benefit to bankruptcy is to either completely wipe away or dramatically reduce the total amount of debt owed by an individual. This process is legally called a “discharge” of one’s debt. In other words, the individual is not legally bound to pay the debtonce this declaration is given, usually after about 3 months of filing a Chapter 7 bankruptcy. Some debts are nondischargeable, such as fines for illegal activity, child support, alimony, most student loans and some taxes. Almost everything else can be wiped out – including credit card debt, medical debt, payday loans, other unsecured loans, most secured loans and even some taxes.
Stop Collection Efforts
An incredible benefit that many people don’t know about is what’s called the “automatic stay.” This provision of the bankruptcy code provides a firewall between creditors and debtors. This means your creditors will be prohibited by federal law from contacting you to collect a debt (no more calls!) and any existing actions taken against you will cease. That includes lawsuits, judgments, garnishments, repossessions and even foreclosure!
Protect Your Assets
It is a common misconception that filing for bankruptcy will strip an individual of their possessions. While it is true that Chapter 7 bankruptcy is often called “liquidation bankruptcy,” what most people don’t realize is that the bankruptcy code includes exemptions. These are used to exempt a large number of possessions from liquidation – this includes housing, land, vehicles, household goods, furniture, clothing, and in some states even cash. In addition, retirement accounts can also be protected. So when we say bankruptcy gives you a clean slate, that doesn’t mean you’re starting from scratch.
Get The Benefits
If you’re in a tough financial situation, filing for bankruptcy could be the light at the end of the tunnel. Consulting with a bankruptcy attorney can show what your options are, sometimes exposing things you might have thought too good to be true.