The Benefits of Filing Bankruptcy

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Description	Bankruptcy can erase most unsecured debts such as credit card bills, medical expenses and overdue utility payments. However, alimony, child support and some types of taxes remain non-dischargeable in bankruptcy. Filing for bankruptcy can offer a legal way to get rid of debt and give you a fresh start. It may not be right for everyone though, and it does impact your credit score. Eliminate Your Debts One of the biggest benefits of bankruptcy is that it eliminates unsecured consumer debt. This includes credit card debt, personal loans and unpaid medical bills. In addition, filing for bankruptcy puts a stop to any wage garnishment by creditors, which means that you won't have to give your employer money each month to pay off your debts. Bankruptcy also stops creditors from foreclosing on your home or repossessing your car. However, filing for bankruptcy does not automatically wipe out secured debts such as mortgages and auto loans. These are debts that you voluntarily agree to secure with property. Before you file for bankruptcy, you must meet individually or in a group with a nonprofit budget and credit counseling agency. Check to see if the agency is approved by your state attorney general and local consumer protection agencies. A Harrisburg PA bankruptcy attorney can help you with the legal process of bankruptcy. Get a Fresh Start Getting a fresh start is an important benefit of filing for bankruptcy. It allows individuals to take advantage of opportunities that may have been unavailable before, due to debt and bad credit. Depending on your situation, bankruptcy can discharge most, if not all of your debts. This includes credit card debt, lines of credit, unsecured loans from banks and payday loan companies, personal and business loans, as well as income tax debt. In addition, the bankruptcy process halts all collection efforts by creditors. This includes repossessions, lawsuits, wage garnishments, bank account levies, and other debt-collection activities. This allows you to regain control of your finances and your life without the stress and anxiety of debt collectors constantly calling and demanding payment. It also shows future lenders that you can manage your credit responsibly. Stop Collection Efforts A major benefit of filing for bankruptcy is that it instantly stops most collection efforts. Once a person files for bankruptcy, creditors are legally required to stop calling or writing letters, and they cannot continue foreclosures, evictions, car repossessions, wage garnishments and other debt-collection activities. A person can also keep certain assets when they file for Chapter 7 bankruptcy, assuming they do not voluntarily agree to secure them with a lien. However, a debtor can still lose any property secured by a lien that they do not catch up on. Bankruptcy’s automatic stay also protects future wages from being garnished to pay discharged debt. This is a major benefit for individuals who are struggling to make ends meet. For more information, contact a Licensed Insolvency Trustee to discuss your options for achieving financial freedom. Improve Your Credit Score While bankruptcy remains on your credit report for seven to 10 years, it doesn’t have to keep you from improving your scores. In fact, if you take the right steps, your credit score can bounce back in as little as four years. While you’re rebuilding your credit, focus on staying within your means and paying all of your debts in full every month. Your payment history accounts for 35% of your credit score, so it’s important to make payments on time. Consider setting up autopay or putting a reminder on your phone to pay bills. It’s also helpful to have someone with a good credit score cosign for you on loans or new credit cards. This will help improve your credit score as you add positive repayment activity to your reports. Restructure Your Debts One of the advantages of bankruptcy is that it can help restructure debts. For instance, with mortgage loans and auto loans, a restructure could allow you to extend the loan term or lower your monthly payment. It's important to understand that filing for bankruptcy does have its limitations. For example, it does not erase all types of consumer debt and can have a sizable impact on credit scores. It's best to consult a non-profit credit counseling agency, financial advisor or bankruptcy attorney for more information about bankruptcy and its limits.
Created	5 Dec 2024
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