When you think of the word bankruptcy, where does your mind go? Do you associate it with failure or embarrassment? It’s understandable if these negative connotations are what come to mind, as bankruptcy is typically perceived as a financial tragedy. However, when you look beyond the stigma that surrounds the forbidden “B” word, you’ll find that there are several benefits to filing for bankruptcy.
If you’re drowning in debt that you know you can’t repay, filing for bankruptcy – while it is a big decision that requires careful thought – is a tool that can pave the way for a better financial future. Below are ten potential benefits to filing for bankruptcy!
- Debt Relief
The top two reasons that people file for bankruptcy are job loss and medical expenses, as these two things are the top drivers for increased debt. Filing for bankruptcy can give you immediate debt relief from these sorts of expenses.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, requires you to sell nonexempt possessions in order to pay back your debt, however, it also eliminates unsecured debts like credit card bills, student loans, medical bills, HOA fees, and more.
Chapter 13 bankruptcy, known as a wage earner’s plan, allows you to keep your assets and set up a payment plan to repay your debts over a span of 3-5 years. Any remaining debt at the end of that time frame is eliminated.
- Fresh Start
Because different types of bankruptcy allow you to eliminate overwhelming amounts of debt or develop a plan for repaying your debts, it gives you the perfect opportunity for a clean slate. Your debts can no longer follow you around, and the burden of owing thousands of dollars can be lifted off of your shoulders. Filing for bankruptcy gives you the chance at finding financial freedom again and creating better spending habits!
- Protection From Creditors
One of the worst parts of being in debt is the constant harassment from creditors. If you’re receiving continuous calls, texts, emails or more throughout the day, filing for bankruptcy will put a stop to it. As soon as creditors receive notice that you’ve filed for bankruptcy, they know they can no longer contact you. You are protected under the Fair Debt Collection Practices Act (FDCPA).
- Structured Repayment Options For Businesses & Individuals
Chapter 13 and Chapter 11 bankruptcy both involve reorganization rather than liquidation. What this means is both types of bankruptcy allows debtors to keep their assets and restructure their debts via repayment plans. Chapter 13 is typically utilized by individuals with regular income, while Chapter 11 is the most complex and expensive type of bankruptcy which is why it’s typically utilized by business owners. Chapter 11 allows entrepreneurs to keep their company open for business while simultaneously paying off their debts.
These two types of bankruptcy offer both individuals and businesses the opportunity to maintain somewhat of a normal life after filing for bankruptcy as they work to pay off their debt.
- Asset Protection
As mentioned before, Chapter 13 bankruptcy allows you to keep important assets like your home, car, or other personal possessions while paying off all or part of your debts over a span of 3-5 years. When that time frame is up, the rest of the remaining debt will be eliminated. This type of bankruptcy allows you to safeguard your assets which gives you the stability you need to rebuild your life.
- Stop Foreclosure & Repossession
Another benefit to filing for bankruptcy is that it stops foreclosure on your home and repossession of your car and other valuable assets. When you file for Chapter 7 or Chapter 13 bankruptcy, an automatic stay goes into effect which immediately prevents these things from happening. Being able to hold onto your home and vehicle gives you a better chance at paying off your debt and recovering from your financial setbacks!
- Rebuild Your Credit
One of the most common misconceptions about bankruptcy is that it ruins your credit score for good. This is simply not true. Filing for bankruptcy can actually help you improve your credit score – yet another benefit to the process. This is because bankruptcy clears negative items from your credit report, leaving bankruptcy as the only negative mark and allowing you a chance to rebuild without mounds of debt tacked onto your credit report.
- Financial Education Programs
In the state of Florida, each individual that files for Chapter 7 or Chapter 13 bankruptcy must complete a financial management course. Before a discharge for bankruptcy can occur, the course has to be completed by debtors (even couples who filed jointly) and a completion certificate has to be filed with the court within 60 days of filing. Financial education programs are another benefit of the bankruptcy process that can help you make better financial decisions and find ways to manage your finances more efficiently.
- Discharge Of Unsecured Debts
As mentioned above, filing for Chapter 7 bankruptcy eliminates all of your unsecured debts. That means that credit card bills, personal loans, student loans, utility bills and more are exempt from repayment and can be eliminated. While you will have to repay some of your debts by selling nonexempt assets like vacation property, newer-model vehicles, investments, and more, having unsecured debts eliminated can give you a head start to getting back on your feet.
- Mental & Emotional Relief
Perhaps one of the biggest benefits of filing for bankruptcy is that you can finally gain some mental and emotional relief. Being overwhelmed by debt can take a significant toll on your wellbeing that can be hard to bounce back from. When you make the step of filing for bankruptcy, it signifies a proactive approach to tackling your financial challenges. Once you begin that process, you have the potential to receive all of the discussed benefits and a sense of relief from the constant stress and anxiety.
How An Attorney Can Help You With The Bankruptcy Process
If you’re up to your head in debt, bankruptcy can be an efficient way to eliminate your debt or organize a plan to pay off some of what you owe. However, it can be a complicated legal process to navigate alone, so it’s important to work with a skilled bankruptcy attorney who can guide you along the way.
O. Reginald “Reggie,” Osenton has three decades of experience helping clients determine which type of bankruptcy is best suited to their needs. He can answer your questions, address any concerns, and help you achieve the best possible resolution. Call today for a free consultation!