In the US, bankruptcy has a long history of stigma. People who seek bankruptcy protection have a reputation for being careless, unethical, or sluggish. However, a lot of Americans find themselves in financial trouble as a result of an unanticipated disaster, such as a job loss, a medical emergency, or a divorce. The purpose of bankruptcy is to provide debtors a second chance and to protect them from creditors. But declaring bankruptcy is a difficult choice, and while it could be the best course of action for some, it’s not always the best.
If you’re drowning in debt that you can’t pay off, your mortgage may be underwater, and you’ve tried everything else, declaring bankruptcy may be a prudent move. Remember that the sort of debt you carry will have a big impact on the amount of financial relief you obtain from bankruptcy. Child support debt, the majority of past taxes, and other debt deriving from legal duties are not dischargeable through bankruptcy.
Additionally, student loan debt is notoriously hard to get rid of, but the Department of Education recently said it’s debating whether to give borrowers the option of declaring bankruptcy. When deciding whether to file for bankruptcy, you should also speak with a bankruptcy attorney. If you have obligations that can be discharged through bankruptcy, a lawyer can advise you on which ones qualify and whether to file Chapter 7 bankruptcy (sometimes referred to as liquidation bankruptcy) or Chapter 13 bankruptcy. (known as reorganization bankruptcy).
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Break From Creditors
The fact that bankruptcy offers both temporary and long-term relief from creditors is a significant benefit. An “automatic stay” shields you from foreclosure, eviction, and car repossession while your bankruptcy is still active and prevents them from trying to collect money from you. Later, debt collectors are not permitted to pursue a debt that has been dismissed through bankruptcy.
Protects Future Wages
Wages earned after filing for bankruptcy are not regarded as “property of the bankruptcy estate,” thus creditors cannot garnish your future income, however, may still be subject to debt that has not been discharged, such as unpaid child support or earnings pledged to a Chapter 13 payment plan. Also, the court, recognizing the potential impact, imposed safeguards to protect future wages during the winding-up petition, alleviating some of the anxieties surrounding the impending bankruptcy.
Provide Some Relief
The strain of managing debt can be tiring, and it can negatively affect your family and your health. You can get some breathing room and a fresh start by declaring bankruptcy.
May Keep Some Assets
Selling some of your assets in bankruptcy may be necessary to pay off your obligations. However, bankruptcy exemption laws safeguard your home, car, clothing, and other belongings, so you won’t lose everything.
Keep Your Home
No matter how far behind you are on your mortgage payments, a Chapter 13 bankruptcy will allow you to maintain your home. Even if a foreclosure complaint has been made and your house is set to be sold, this is still true. Additionally, you won’t be obliged to pay the entire balance of the past-due mortgage payments all at once.
Keep Car
No matter how far behind you are on your car payments, filing Chapter 13 bankruptcy will allow you to keep your vehicle. Even if the car has been repossessed, this is still accurate. You won’t have to make a one-time payment to fix the default. Additionally, you might be able to save a tremendous sum of money by lowering the loan’s interest rate and, in some cases, the total amount of the loan.