A bankruptcy discharge can ruin your credit score, embarrass you, and even cause you to lose some of your possessions. As such, most people use bankruptcy as a last resort. However, if you have confirmed that you have no option but to file for bankruptcy, take advantage of the process and enjoy the following benefits.
Bankruptcy can help you delay or avoid foreclosure. The court will issue an automatic stay that informs your creditors to stop their debt collections efforts immediately. Thus, if your mortgage lender was about to start or had started the foreclosure process, the automatic stay will cause them to stop the process. The automatic stay exists both for chapter 13 or chapter 7 bankruptcy.
The delay in foreclosure can help you in several ways. For example, chapter 7 bankruptcy can discharge some debts and help you focus on your mortgage payments. Chapter 13 bankruptcy may wipe out your second and third mortgages and help you reorganize your primary mortgage repayments. Your circumstances determine whether bankruptcy can help you keep the home.
Stop Wage Garnishment
Creditors sometimes get court orders to garnish wages or income to recover loans. If your creditors succeed with such an effort, the authorities will divert some of your paycheck or income to your creditors.
Such involuntary payments of wages can wreck you financially because it denies you the chance to budget with your income. For example, you may lack money for emergencies that may arise, like a broken-down car, even though you would normally be able to cover the cost with your full income. A bankruptcy filing can help you avoid such wage garnishments so that you don't have to suffer.
Learn From Credit and Debt Counseling
Credit and debt counseling are an integral part of the bankruptcy discharge process. The primary reason for credit counseling is to determine whether you are a good candidate for bankruptcy. The course will help you understand your finances, debts, and alternative repayment options. This knowledge is invaluable for those with limited financial skills and experiences.
Debt counseling provides you with financial management tools to help you succeed with the bankruptcy. If you file with your spouse, each of you goes through credit and debt counseling. Take advantage of these classes to improve your financial literacy.
End the Cycle of Debts
One of the worst things about debt is that it is cyclic; debt often causes more debt. For example, if you are up to your ears in credit card debt, you may be tempted to borrow money from other sources to pay off the debt. After that, you may need more debt to clear your latest loan.
In such a situation, the more debt you pay, the more debt you accumulate. You also can't save enough money to learn a trade, go to school, or start a business. A bankruptcy discharge gives you a way out to wipe the slate clean and start afresh. You can leave your financial problems behind if you don't repeat the same mistake that got you into trouble in the first case.
Discharge Obligation to Repay Debts
One of the best things about bankruptcy is that it discharges your obligations to pay off some of your debts. For example, a chapter 7 filing can help you get rid of your credit card debts. Even if you don't get rid of all debts, which is usually the case, a bankruptcy filing can help you modify your debts.
Debt discharge or modification is a great benefit if you are truly unable to pay back your debts. If nothing else, a debt discharge or modification can help you save the money you earn and do something useful with it.
Bankruptcy is a complicated legal process with long-term ramifications. The Michelson Law Office can help you avoid bankruptcy or get a discharge depending on what you want and what is possible. Contact us the moment you start to think of bankruptcy because early intervention yields the best results.