Deciding to file for bankruptcy is never an easy decision. There are many myths and uncertainties about what it means to file for bankruptcy and none of them are positive. Many people think that their finances will be ruined forever and that creditors will take away your home, your car, and any other possession of value to recoup their losses. None of these things is true. The fact is, bankruptcy is not always a bad thing and that filing for Chapter 7, 11 or 13 may be the best decision for you at this time. Here are some of the positive aspects of filing for bankruptcy.
- Creditors will stop calling – If you’re contemplating filing for bankruptcy then you’re most likely in some serious debt. As such, it’s likely that your days are plagued with phone call after phone call from creditors asking for money. Once bankruptcy proceedings begin, these calls stop. The silence that follows will allow you to clear your head and get your finances straight.
- No home foreclosure – Another common fear is that after you file for bankruptcy, the bank will foreclose on your home to recoup losses and you will be unable to obtain another mortgage in the future. This isn’t true. In fact, bankruptcy will stop any foreclosure actions that may have already begun and you can stay in your home. Also, mortgage rates are based on credit scores. Even though your credit score will take a huge hit after a bankruptcy filing, you can steadily build it back up and apply for another mortgage later.
- Settlement – By filing for bankruptcy, you will work with your creditors to settle. The main interest of creditors is be paid. If they can’t be paid in full, then they at least want something. After a bankruptcy filing you can effectively negotiate with the creditors and come to an agreement on payments that will keep food on your table and money going into their pockets.
- It’s a learning experience – Sometimes people just get in over their heads financially and it takes a great loss to learn how to properly manage finances. You could effectively take this painful situation and turn it into something that you learn from and never do again.
Depending on the type of bankruptcy you’re planning on filing for it’s important to speak with a professional bankruptcy lawyer before doing so. You need to know the differences between the three types, the ramifications, and long-term effects. The truth is that most people file for bankruptcy not because they’re poor financial planners, but because something catastrophic has happened. High medical bills are the most common. It’s unfortunate that such a negative stigma is attached to bankruptcy because these are laws that are there to protect you and your family. It’s always better to file for bankruptcy than to subject yourself and your family to living on the streets while attempting to pay off a great debt.
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