In the modern day, bankruptcy remains as one of the most affordable and quick ways to arise from debt while putting a stop to debt collections. It is also beneficial in maintaining property. Declaring bankruptcy allows individuals and businesses that are unable to pay their debts hence resolving their financial difficulties and start upgrading their credit. There are various advantages of filing for bankruptcy as discussed below.
When you successfully file for bankruptcy, you get the feeling of having a clean account to start rebuilding your credit. Rebuilding credit requires hard labor and may cause strains but bankruptcy can give you the chance to start over. It will be hard to get credit at the beginning, but this does not make it impossible. The bankruptcy on your record means that you will have to pay more to borrow money. This is brought about by the probability of you being a subprime borrower. Subprime borrowers normally pay higher interest rates and penalties for defaults as they are considered a greater risk.
Wipe away Debts
Another major benefit of declaring bankruptcy is to either completely wipe away the debts or in a way reduce the total amount of debt owed by an individual. Legally, this process is known as a discharge of one's debt. In other words, the individual is not legally bound to pay the debt once this declaration is given, usually after about 3 months of filing a Chapter 7 bankruptcy. However, some debts are no dischargeable. These includes fines for illegal activity, child support, most student loans and some taxes. So, almost everything else can be wiped out including credit card debt and medical debt.
Stop Bill Collectors
An incredible benefit that many people do not know about filing for bankruptcy is what is called the "automatic stay." When you are provided with the bankruptcy code you automatically stay free from collectors. This means that your creditors will be banned by the federal law from contacting you to collect a debt. Also, any existing actions taken against you will stop. That includes lawsuits and judgments. Bankruptcy relieves that extra stress caused by talking to bill collectors or avoiding them.
Protects your Assets
Filing bankruptcy does not strip an individual of their possessions contrary to what most people think. Confusion often arises in Chapter 7 bankruptcy which is at times referred to as "liquidation bankruptcy". It also includes the bankruptcy exemption codes. These exemptions are used to exempt a large number of assets from liquidation including houses land, vehicles, states even cash. In addition to this, retirement accounts can also be protected. Therefore, when we say bankruptcy gives you a clean account, that does not mean you are starting from scratch.