Consumers who are thinking about filing for bankruptcy have a lot of questions and often don't know if there are any benefits. Other than getting rid of the debt that hangs over their heads every day, are there any other benefits to filing bankruptcy, which could hurt their credit report for 7 to 10 years?
Before making a final choice, you should think about a lot of different things. There are always choices, but it's not always easy to make the right one. Here are some of the benefits that can help people make decisions that require a lot of thought and are right for them. The pros aren't always the deciding factor, but they can help you choose wisely.
The Stay Automatic
One benefit is that when a person files for Chapter 7 or Chapter 13 bankruptcy, a petition is filed and what is called a "automatic stay" goes into effect. This means that the creditors are legally required to stop doing anything to get their money back. This means that once they know your plans, they have to stop calling, leaving messages, or sending you mail. If creditors keep trying to get money, the court system can punish them. A lawyer is the best person to help in this kind of situation. Bankruptcy lawyers are happy to meet with you for free and answer any questions you may have. They will help you see the good things that Chapter 7 and Chapter 13 bankruptcy can do for you. Each kind of bankruptcy comes with its own set of pros and cons.
A New Beginning
When deciding if Chapter 7 is the best option for them, consumers should also think about how good it would be to get a fresh start with their money. Chapter 7 bankruptcy is better for people who owe a lot of money but don't own much or anything. Chapter 7 bankruptcy lets you choose which debts you want to get rid of. This includes debts that are both secured and not. Unsecured debts include things like credit card debt and medical bills. A secured debt is one for which you have put up collateral, such as your house, car, or other large assets you own. Liquidation is another name for a Chapter 7 bankruptcy.
Possible Disadvantages
Chapter 7 is not a perfect solution, though, because it doesn't cover all unsecured debts. Most school loans are not covered by Chapter 7, for example. Please talk to your bankruptcy lawyers and ask them questions. Most unsecured debts can be cancelled or forgiven for consumers who qualify for Chapter 7 bankruptcy. If payments aren't made on a secured debt, the creditor has the right to seize and sell some of the debtor's assets to pay off the debt.
Chapter 13
Chapter 13 bankruptcy is better for people who make a steady income, have secured debts, and don't want to lose their property. Chapter 13 bankruptcy lets the person file a plan with the bankruptcy court to pay off secured debts over the course of three to five years. This means that the consumer doesn't have to give up the things that were used as collateral for the debt. But each person's situation is different, and that needs to be taken into account before deciding which type of bankruptcy is best for them.
Opportunities to Learn
When a person decides to file for Chapter 7 or Chapter 13 bankruptcy, they are required to take some classes. The consumer has to go to classes about credit counselling and being a responsible debtor. This is a benefit that not only helps you figure out what went wrong, but also helps you come up with new ways to budget, pay bills, and spend your money so you don't get into the same financial trouble again. You will also learn how to keep your identity safe and how to read and keep an eye on your credit report.
Getting a job after going bankrupt
Consumers who are worried that they will lose their jobs because they are filing for bankruptcy should not worry. Another benefit is that employers are not allowed to fire an employee just because they are filing for bankruptcy. Keep in mind, though, that filing bankruptcy may make it harder for you to get a new job for a few years.
