I am often asked about the pros and cons of filing for bankruptcy protection. I tell them simply that I can name 5 positive things right off the top of my head that bankruptcy can do. Of course there are more and this list is not exclusive:
1. The Automatic Stay – Hands down the leading benefit of filing for bankruptcy protection is the automatic stay, which immediately stops most creditors and collection actions in their tracks.
2. Debt Relief – A key goal of a bankruptcy filing is often to obtain a Discharge from one’s debts. A Discharge acts as an injunction to prevent a creditor (or most any other debt collector) from attempting to collect on any dischargeable debt included in the bankruptcy.
3. Stripping a Second Mortgage from One’s Home – The process of “lien stripping” is reserved for Chapter 13 cases – although a recent decision by the 11th Circuit Court of Appeals may pave the way for stripping second mortgages in Chapter 7 bankruptcies as well.
4. Repay Creditors Over Time – Chapter 13 bankruptcy allows debtors the opportunity to repay all or some portion of their debts in a reasonable fashion. Typically, the Chapter 13 payment is equal to the debtor’s disposable monthly income.
5. Rebuild Credit – Yes, bankruptcy can actually improve one’s credit worthiness. Many people may be surprised to learn that obtaining credit after a bankruptcy is easier to obtain than shortly before the filing. Why? The answer is simple. First, one may file bankruptcy to discharge debt only once every 8 years (4 years following a Chapter 13 discharge). As such, a creditor making immediately after a bankruptcy discharge stands a much better chance getting paid in full. Second, bankruptcy sheds the debtors of overburdening debt, thereby freeing up disposable income to pay new obligations. Bankruptcy is often the financially responsible step to take and can be a key part of building a strong financial future.
Call us today to learn more about the bankruptcy process.