The reasons for declaring personal bankruptcy are varied. While it all stems from uncontrollable debts, why this has happed differs in every case, with some of the more common causes of spiraling debt being divorce, job loss, and medical bills.
While nobody wants to file for bankruptcy and the ramifications of doing so are long-lasting, there are instances where people have no other option. When this happens, it’s understandable that you feel terrible about having to file for bankruptcy. However, you can pick yourself back with the knowledge that bankruptcy may not be as bad as you think!
Here are 4 reasons why filing bankruptcy may not be as bad as you thought:
Cancel Debts
Let’s get the most obvious one out the way first – the main benefit of bankruptcy is that it lets you cancel various debts that are causing you financial hardship. Both Chapter 7 and Chapter 13 bankruptcy allow the individual to get rid of their debts, so there is some relief knowing that a lot of your debt can be wiped out.
For example, in Chapter 7 you sell any assets and then have debt discharged, while in Chapter 13 you agree to a debt repayment plan that sees your excess debt cancelled after meeting the repayment plan.
No More Creditors
Dealing with creditors is easily one of the most stressful parts of living with serious debt. It’s never fun to have companies chasing you up for various debts, especially when it’s a constant occurrence and something you can get rid of.
After filing for bankruptcy creditors cannot legally contact you for their debts. This is a welcome relief to most people living with debt, as the being frequently hassled by creditors begins to weigh heavy after time.
Recover Your Credit Score
Yes, when filing for bankruptcy it remains on your credit score does take a hit and remains on record for ten years, yet it can give the chance to recover your credit score over the long-term. For example, most people filing for bankruptcy see their credit score increase by around 100 points the first year after filing, so don’t expect it to be a death sentence for your credit.
In fact, you can probably start borrowing again in 2-3 years, albeit with a much higher interest rate, although this gives a chance to slowly rebuild credit in the years following bankruptcy. Assuming you learn from your mistakes, you can start cautiously borrowing and repaying on time to start recovering your credit rating.
Moreover, if you didn’t cancel the debts with bankruptcy they would continue to accumulate and seriously harm your credit score anyway, so filing gives the chance to slowly rebuild.
Keep Things the Same
Bankruptcy laws in most states allow you to keep your home as a bankruptcy exemption, while its possible for other important assets such as your car to be protected. This wouldn’t be the case with creditors closing in on you, so bankruptcy could actually help you keep things the same in your life!
No selling the home or car, moving state, or trying to find new work either, as employees cannot discriminate anyone filing for bankruptcy. Yes, you will need to make some major lifestyle changes, yet for the most part things should stay much the same without much upheaval.
The Travis Law Firm provides professional legal representation for Chapter 7 & Chapter 13 bankruptcy services for residents of all cities in Riverside and San Bernardino Counties. We have offices in Riverside, San Bernardino, Victorville, Temecula, Cathedral City and Ontario for the convenience of our Inland Empire, High Desert, and Coachella Valley clients. For more information about our bankruptcy law services and other legal representation, call us today at (951) 274-9501 or (951) 274-9501.