The bankruptcy process is a stressful one, and people often think of it as a tool for the desperate. However, bankruptcy is legitimately beneficial for people with substantial debt. Not only does it help them mitigate the stresses of debt collection, but it also sets them up for financial freedom in the future. What are some of the main benefits people derived from filing for bankruptcy?
A filing puts an immediate stop to collection activity
If you think you may need to file for bankruptcy, you have likely endured constant attempts at collection from creditors for weeks if not months. Your phone at home and at work may ring frequently, or you may even face a civil lawsuit filed by a creditor. That collection activity can lead to increasing levels of personal stress and possible legal consequences, like the garnishment of your wages.
Once you submit your initial bankruptcy paperwork, an automatic stay on collection activity immediately takes effect. Most collection companies and creditors routinely check for bankruptcy filings to avoid violating your rights, but you may still receive a few collection calls immediately after you file. Just telling the creditors about your pending bankruptcy will get them to terminate the call and stop calling you in the future.
You can also request the dismissal of pending creditor lawsuits until the courts resolve your bankruptcy. Bankruptcy won’t undo a judgment already in place, but it can help you avoid a creditor securing a judgment against you.
A bankruptcy gives you the opportunity to get rid of some debts
If you successfully complete the necessary steps for the kind of bankruptcy you file, you will be eligible for a discharge of your remaining unsecured debts. The courts will effectively eliminate your obligation to repay the discharged debts included in your bankruptcy.
Unpaid medical bills and credit card balances are among the unsecured debts that you will no longer have to repay after your discharge. Eliminating those debts will free up money in your future budget so that you can better manage your household expenses.
Identifying the benefits of filing for personal bankruptcy might motivate you to file so that you can regain control over your income and start rebuilding your credit score.