No one hopes to file bankruptcy. No one enjoys it. Filing for bankruptcy is a very personal decision. But filing for bankruptcy is not the end of the world. Bankruptcy laws are intended to help people, not harm them. There are, of course, consequences to filing bankruptcy, but there are also many benefits. If the benefits outweigh the harm in your particular circumstances, bankruptcy is the right decisions for you.
Benefits of Filing Bankruptcy
Bankruptcy is a way out from under mounds of debt. Not all debts are dischargeable in bankruptcy, but many, many are. People faced with mounds of debt often feel a loss of control. They feel a sense of hopelessness.
A person who puts $500 per month toward a $10,000 debt feels much less stress than a person who puts $500 toward a $200,000 debt. Yet each person is paying the same amount each month. This is because one person feels that his or her debt can be conquered and the other feels a downward spiral in life.
Through bankruptcy, some or all debt may be discharged or eliminated. After bankruptcy, a person can begin rebuilding his or her credit.
Who Files for Bankruptcy
People who file for bankruptcy are often facing one or more of the following: more credit card, medical, and utility bills than they can pay, money judgments against them, job loss or garnishment of wages, relentless calls from collection agencies. It can happen to anyone. It doesn’t mean you have been irresponsible with money. Hard circumstances befall us all in different ways, and for many people it is hard financial circumstances.
By discharging much of the debt owed, people who file for bankruptcy are given an opportunity to get back on their feet with a fresh start.
Beware, however, if you attempt to defraud your creditors and hide your assets within one year before filing for bankruptcy, you may not be allowed to file for bankruptcy, or the bankruptcy court may recover the property you tried to hide.
When you file for bankruptcy, an automatic stay is placed on your creditors’ attempts to collect debts.
Some Debts are Eliminated through Bankruptcy and Some are Not
As stated above, some types of debt are dischargeable in bankruptcy, or eliminated through bankruptcy. Others are not.
Credit card debts are one main type of debt plaguing many people contemplating filing bankruptcy. Credit card debts are dischargeable in bankruptcy.
However, child support, alimony, taxes owed, and student loans are generally not dischargeable in bankruptcy.