Are debt collectors constantly calling you? Is it challenging to keep up with your financial obligations? Falling behind on your debts can be overwhelming and stressful. When you’re in the middle of the issue, it can be hard to believe there is an end and a solution.
For many people, their financial difficulties began due to an unexpected loss of income or medical event and not because they were living beyond their means. Additionally, many Americans don’t have an emergency fund large enough to cover unexpected expenses. About a third of Americans report still being in debt from borrowing money to pay for a crisis. Experiencing another unexpected problem can leave people unable to meet their financial obligations.
If you’re being constantly harassed by debt collectors, call the Collection Agency Complaints Hotline for immediate help.
Bankruptcy is one option that can give people relief from their unsecured debts and help them start rebuilding their credit and financial situation. Bankruptcy can help people who are otherwise unable to pay their creditors. But first, it’s essential to explore all your options and be sure that bankruptcy is the right choice for you. The free Bankruptcy Advice Hotline at (888) 734-2585 will connect you with an expert to help you determine what debt relief options are available and which are best suited for your situation.
5 Advantages of Filing Bankruptcy
Filing bankruptcy gives you a fresh financial start. This new start can be emotionally freeing, especially once the process has begun and you experience some of the immediate benefits.
Below are some of the advantages of filing for bankruptcy.
In order to file for bankruptcy, you will need to complete a series of steps. We break down the process to file for Chapter 7 bankruptcy in our blog post, “How to File for Chapter 7 Bankruptcy”
1. Many debt collection activities are automatically stopped
When filing for bankruptcy, the court will likely issue an automatic stay. This injunction helps temporarily protect you against certain collections and actions by creditors. Some common advantages of an automatic stay include a temporary break from:
- Wage garnishments
- Phone calls from debt collectors
- Property repossession
- Evictions
- Foreclosures
The ceasing of bill collector calls and letters can help reduce your stress. The aggressive collection tactics should also stop even for debts that can’t be discharged.
An automatic stay doesn’t cover all types of debt or situations, such as a government tax debt, co-signers, or establishing and collecting child support or alimony. Additionally, a creditor can request a modification from an automatic stay.
2. You may be able to cancel some of your debts
When you file for bankruptcy, you may be able to cancel your personal responsibility to pay certain unsecured debts. When you have a bankruptcy discharge, you are no longer legally required to pay the debt. Common types of dischargeable debts include:
- Credit card debit
- Personal loans
- Medical bills
- Utility bills
There are exceptions to what debts are canceled based on the type of bankruptcy filed and whether a creditor files an objection. You can’t discharge student loan debt, child support, alimony, or some types of tax debt. Additionally, liens do not go away automatically with a bankruptcy discharge. However, if a creditor has a lien on your property, you may be able to file a motion to remove the lien.
3. You will likely qualify for some exemptions that allow you to keep certain property and possessions
Bankruptcy exemptions indicate what you can keep during and after the bankruptcy process. States also have exemptions, and some states allow you to choose whether you select the state or the federal exemptions. Regardless you will only follow one list, either the federal or the state, depending on where you live.
If your property or car are considered an exemption, then it will be protected from creditors. This protection is in place since part of the agreement for many Chapter 7 bankruptcy is that in exchange for discharging you from certain debts, you may have to give the property or possession to the creditor as compensation. Exemptions protect many types of property, such as your car, furniture, retirement accounts, and more, up to a limit.
4. Your credit score is likely to improve with time
While a bankruptcy stays on your credit report for seven to ten years, you can rebuild your credit score before that period is over. A large scale study by Lending Tree found 43 percent of individuals who had a bankruptcy on their credit report had a credit score of 640 or higher within a year of their filing. After two years, about 65 percent had a credit score above 640. These people became eligible for loans even with a bankruptcy on their credit report.
5. You’ll have a clean slate to plan a new financial approach
Filing for bankruptcy can give you a fresh start and allow you the peace and time to rebuild financially. During this time, you will likely have to eliminate most or all of your credit cards. While adjusting to bankruptcy and building your credit is difficult at first, it also allows you to learn new ways to approach your spending and obligations without the stress of being behind on payments.
Bankruptcy Can Give You a New Start, If It’s Right for Your Situation
Unexpected life events can lead to overwhelming debt. If you get too far behind on your financial obligations and other debt solutions aren’t working, it can seem like there’ll never be an end to the collection calls and letters. Fortunately, bankruptcy can help you get out from under debts, so you can begin to rebuild your credit and get back on track.
Make no mistake, bankruptcy doesn’t solve all debt problems. It’s critical to examine the main sources of your debt to see if bankruptcy will address those before filing.
When you’re trying to determine whether bankruptcy is the right financial choice for you, it can help to consult with an expert who you can trust. The free Bankruptcy Advice Hotline at (888) 734-2585 can connect you with an experienced bankruptcy expert who can help you consider your options and understand what to expect if you file for bankruptcy.
