Many families face financial challenges. These difficulties can include unexpected expenses, a mountain of debt, job loss or even divorce.
When people consider filing for bankruptcy, they often focus on the financial benefits – a fresh start and discharge of debt. However, bankruptcy can have other positive effects on family life as well.
1. It’s a Legal Process
Unlike other debt relief options, filing bankruptcy is a legal process with fees and paperwork. A bankruptcy lawyer in Harrisburg PA or law firm can help with the process. The cost of the process can be less than alternative debt-relief strategies, such as debt settlement.
Bankruptcy can prevent creditors from pursuing collection actions against you, including harassing phone calls. Harassment is a real concern for many families, and it can lead to the breakdown of relationships and the loss of income needed to pay off debt.
Filing for Chapter 7 bankruptcy allows you to get a fresh start by discharging most of your debt. Depending on state laws, you may keep some of your assets (although exemptions vary). In addition, the “automatic stay” in bankruptcy can stop foreclosures, repossessions and wage and bank account garnishment. It does not, however, prevent credit reporting issues from arising and can impact your ability to secure mortgages, loans or other forms of credit in the future.
2. It’s a Last Resort
People sometimes file bankruptcy because they’ve been hit with unavoidable expenses, such as divorce-related costs or massive medical bills. They may also be battling to pay debt that stems from poor financial decisions, including excessive credit card usage.
Being served with a lawsuit from creditors is often the wake-up call that prompts people to consider bankruptcy, as it gives them a chance to take stock of their situation and make more informed decisions. It may be the last opportunity to avoid judgments, garnishment, liens and levies on assets.
If a judge approves a Chapter 7 bankruptcy, the court can erase most unsecured debts and allow you to keep property that qualifies as exempt. However, certain debts cannot be discharged in bankruptcy, such as alimony, child support, most types of taxes and court fines and restitution orders. Those who want to file for bankruptcy must submit documentation on their income and debts, as well as attend credit counseling with an approved agency.
3. It’s a Second Chance
Although bankruptcy is a serious process with long-term repercussions, it can give
you a second chance to rebuild your financial health. It’s also a way to get rid of debt that you could not realistically pay back, or at least reduce the amount that you owe.
Bankruptcy can stop creditors from calling and harassing you, and it can help you temporarily prevent a home foreclosure, car repossession or wage garnishment. If you owe tax money, filing for bankruptcy may qualify you to receive an offer in compromise, which allows you to settle with the IRS for less than what you actually owe.
Before you file, it’s important to explore alternatives like non-profit credit counseling or debt management programs. However, these options generally take a longer time to resolve than bankruptcy and don’t guarantee complete elimination of your debt.
4. It’s a Way to Start Over
While filing bankruptcy isn’t a magic wand to wipe away all debt, it does give you a chance to reorganize your finances. It also temporarily stops creditors from foreclosing on a home or repossessing a car and can stop wage garnishment or disconnection of utilities.
Bankruptcy can also exempt property from creditors, such as a primary car or home and some personal property. Exemptions may vary by state. Creditors can have security interests in your home or car, which means you gave them a mortgage on the house or put your vehicle up as collateral for a loan.
Once you are free of debt, you can start putting aside money into an emergency savings account that can help with unexpected expenses. It is also important to maintain a positive bill payment history so you can rebuild your credit score gradually. This can take time but it is well worth the effort. It can allow you to g+et the life you want and provide for the people who rely on you.
