We have previously discussed the pros and cons of filing for bankruptcy in a previous post but here we are specifically going to focus on the advantages of filing for bankruptcy.
Reasons people file for bankruptcy:
Debt collectors won’t stop calling and dodging calls is a regular occurrence.
They are being sued by debt collectors.
The danger of home foreclosure is becoming a very real risk.
They are using loans to pay bills.
Retirement and other exempt assets are being liquidated to pay bills.
Advantage #1: Stop the Debt Collectors
Debt collectors are persistent and often unyielding. They start off with the occasional call but then those calls increase. After the calls increase, they will start sending you more official documents in the mail. They may even go as far as to sue you, garnish your wages, foreclose your home, shutoff your utilities, etc.
Declaring bankruptcy facilitates something called an automatic stay. An automatic stay prevents debt collectors and creditors from doing any of the things listed above.
The automatic stay does not discharge the debt. It only disallows creditors from taking action to collect the debt until the bankruptcy case is completed and closed.
Advantage #2: Not Having to Repay Dischargeable Debts but Keep Exempt Assets
This is the primary advantage that comes to mind when people think of bankruptcy. Filing will wipe out all of the dischargeable debts.
Common examples of dischargeable debt include but are not limited to:
- Credit card bills
- Medical bills
- Personal loans (these are evaluated on a case by case basis)
- Overdue utility bills
Now, if you incur new debt after the filing date, this will not be considered dischargeable and you will be obligated to repay that debt.
At the same time, you don’t lose all your possessions. There are specific exemptions you need to review with your attorney.
Recommended Read: Exempt Assets for Bankruptcy in Kansas
Advantage #3: Your Credit Will Begin to Improve after Filing
Many debtors begin improving their credit rating after filing for bankruptcy if you take the right steps.
It will take time but you can improve your score by establishing new credit and paying your bills. Make sure that you only take on debt that you are financially able to pay off responsibly and keep track of your score on your credit report.
Advantage #4: Learn Healthy Financial Habits with Credit Counseling
Advantage number 3 and 4 go hand in hand. When you file for bankruptcy, you will be required to have credit counseling. Credit counseling is intended to provide education and guidance on how to properly rebuild credit and develop healthy financial habits.
Credit counseling teaches you how to use credit responsibly and not repeat the same missteps made before filing for bankruptcy.
Advantage #5: Stress Relief
Money is a huge stressor – even for those that have not incurred significant debt. A survey by Northwestern Mutual found that money was the dominant source of stress for 44% of Americans.
The combination of not being able to pay your bills, constant calls from collectors, and fear of losing assets can cause extremely high amounts of stress. This high-stress situation can have serious effects on other aspects of your life by affecting your healthy, well-being, and personal relationships.
Filing for bankruptcy will remove some of this stress from your life. Yes, your credit score dropping is stressful but not as stressful as losing your home or having your wages garnished and credit can be rebuilt.
Revisit the reasons that people file for bankruptcy at the top of this post and evaluate if any of those reasons apply to you. Taking an honest look at your financial situation could be the first step towards freedom from debt.
Bankruptcy is a complex and it is best carried out with help from an experienced attorney.
Contact the bankruptcy attorneys at Oswald Law by calling 620-662-5489 today to schedule a consultation and start your journey towards financial health and stability.