Some of you might not know the potential benefits of filing for bankruptcy despite some of you might qualify for it. Undoubtedly, bankruptcy can seriously impact a person’s finances for many subsequent years. However, it is still the best option for many other people depending on their situations. Each person’s situation of filing for bankruptcy is different while depending on their financial circumstances. The decision of when, if, and how to file for bankruptcy can be a complicated process. However, one can avail guidance from a skilled bankruptcy trustee, such as Harris & Partners, and consult whether filing for bankruptcy is the best option. You may also contact your lawyer, discuss your situation and get a better idea about how filing for bankruptcy could affect your financial situation.
What are the advantages of filing for bankruptcy?
Temporary Suspension of Debt Collection
Once you file for bankruptcy, the court automatically grants a stay against debt collection activity. It is important to note that this stay doesn’t automatically cancel your debt. It only suspends the debt collection until your case is completed or the court lifts the stay. Due to the automatic stay against your creditors, you won’t receive any calls or letters from debt collectors; there won’t be any lawsuits on the debts. You will stay free from property repossession. There won’t be any wage garnishments and foreclosures of home mortgages.
If, after the automatic stay granted by the court, a creditor still tries to collect a debt, your lawyer is authorized to file a contempt of court action against the collectors. If this happens, the court can fine the debt collectors by making them pay damages, or the court can stop their debt collection attempts. However, an automatic stay against debt collection doesn’t stop criminal proceedings, government tax audits, the collection of alimony/ child support, and the establishment of paternity.
You should also know that if you already filed for bankruptcy once in the last year, you can ask the court to extend the first temporary suspension. However, if you filed more than once during the past year, your automatic stay won’t be effective until the court orders explicitly state so.
Discharge of Debts
Another benefit of filing for bankruptcy included the possibility of having your debts discharged. You might also have your responsibility of repaying your debts canceled altogether. The term dischargeable debts refer to those debts that can be eliminated via bankruptcy. Typically, such debts include utility bills, medical bills, personal loans, and credit card debt.
Did you know that bankruptcy exemptions can allow you to maintain the ownership of your property? If you succeed in having an asset exempted, it means you won’t have to worry about it (the property) from getting seized in bankruptcy. Such exemptions can also protect a certain amount of dollars of a property; sometimes, an exemption covers an asset’s entire value. Some bankruptcy exemptions only apply to specific property types, such as a wedding ring or a motor vehicle. At the same time, other bankruptcy exemptions are applied towards any other asset owned by you.
One of the basic reasons people delay filing for bankruptcy is their credit score since a bankruptcy filing remains on the record for up to 10 years. There have been cases where debtors started improving their credit scores once they filed for bankruptcy. After the cancellation of one’s dischargeable debts, it gets easier to move on with a clean slate and rebuild one’s credit score. However, if you file for bankruptcy at the wrong time, it can actually make your financial situation worse. Therefore, we recommend consulting with a trustee to get a better picture of the potential outcomes.