Bankruptcy law was created to provide individuals with a way to resolve debt problems. Some people assume that you only need to file bankruptcy if you are "bad with money" or you abuse credit; however, this is not true. While some people who file bankruptcy do so because they got into trouble with debt, most people need the help of the bankruptcy court because of a financial crisis caused by the loss of a spouse, unemployment, a failed business, divorce, personal injury, accident, or sudden illness. You can experience a financial crisis at any time — bankruptcy can help you recover and rebuild your credit following that crisis.
What Bankruptcy Will Do for You
Being unable to pay your debts is stressful, frightening, and frustrating. In addition to relieving this burden, filing bankruptcy does several other things to improve your finances and your life.
Stop Creditor Harassment
Creditor harassment is one of the most common complaints by consumers when asked about debt collection. Debt collectors use abuse tactics to harass and frighten consumers into paying debts they cannot afford to pay. Endless phone calls, threatening letters, contacting you at your place of employment, and even sending someone to your home are just some of the actions debt collectors take. Filing bankruptcy stops these actions immediately and prevents creditors from taking any other action to collect the debt.
You Have an Ally To Talk With About Your Debt Problems
When you are dealing with debt problems, you feel alone. Meeting with a bankruptcy attorney to discuss your options gives you an ally to provide support and guidance. It is a huge relief to know that someone understands your situation and is willing to help you find a permanent solution to your debt problems.
Stop Wage Garnishments
When you file bankruptcy, creditors cannot garnish your wages for debts. You need the money you earn to provide for you and your family. Bankruptcy will stop garnishments and eliminate the debt permanently.
Automatic Stay Puts A Halt On All Of Your Payments
When you file bankruptcy, the automatic stay protects you from your creditors. You can stop making payments on credit card bills, medical debt, personal loans, and other debts, if you have not already done so. This provides you more money each month to paying your necessary living expenses. Once your bankruptcy case is over, those debts will be discharged and you will no longer be required to pay those debts.
Save Your House and Your Car
If you are facing foreclosure or repossession, filing bankruptcy can save your home and you car. By filing a Chapter 13 bankruptcy, you can spread out the past due payments over a 60 month plan instead of trying to catch up the arrearage all at one time. In some cases, you may be able to lower the interest paid on your car loan and the amount you owe on your car.
Save Your Retirement Funds
Many people begin to dip into their retirement funds to pay debts when they do not have the income to do so; you need to protect your retirement funds for your future. Retirement funds are protected from creditors and the court in a bankruptcy filing. You can eliminate your debts and keep your retirement funds secure.
Chapter 13 Consolidates Debt Payment Into An Affordable Monthly Payment And Then Discharges Unpaid Balances
A Chapter 13 bankruptcy case combines your unsecured debt, and some secured debt, into one monthly payment that is lower than all of those payments combined. The plan spreads out these payments over 60 months so you can afford to pay your debts. Unsecured creditors only receive a percentage of the amount owed on the debt. When you complete your plan, the unpaid balance of the unsecured debts are discharged so you never need to worry about those creditors again.
Chapter 7 Discharges All Unsecured Loans
If you qualify to file a Chapter 7 case, most, if not all, of your unsecured debt will be discharged. In four to six months, you can be free from unsecured loans and debts.
One of the best things that filing bankruptcy can do for you is give you a fresh start. You have a clean slate to rebuild your finances for a healthier financial future.
What Bankruptcy Cannot Do for You
There are some things that filing bankruptcy cannot do for you. Some debts, such as most student loans, most taxes, alimony, and child support, are non-dischargeable. You still must pay those debts even though you file bankruptcy. However, Chapter 13 may help you reorganize some of those debts so that they are more manageable. Filing bankruptcy will not change poor budgeting habits and money management skills. However, the mandatory credit counseling course and debtor education course provides the information and tools that you need to improve your budgeting and money management after filing bankruptcy.
If you are struggling with bills you cannot pay, sign up for a free bankruptcy consultation with Kain & Scott, P.A. to determine if filing bankruptcy is the best way to resolve your debt problems. We will discuss all available consumer debt solutions to help you reach a decision that is in your best interest.