Is it time to declare Bankruptcy? Here's the benefits

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  Posted By
  Victoria Stephens

• Published On
  Sat, June 16

• Reading Time
  4 Minutes

While the thought of declaring bankruptcy may seem overwhelming and intimidating, it can actually offer a fresh start for those in financial turmoil. During the bankruptcy process, a person or business may have some of their burdensome debts forgiven, allowing them to move forward without the weight of overwhelming debt hanging over them.

It's important to note that bankruptcy will have an impact on a person's credit score and borrowing ability in the future, but it also offers an opportunity to begin rebuilding credit by successfully managing finances and making timely payments on any remaining debts. Plus, creditors also stand to benefit from the bankruptcy process, as they may receive at least partial repayment through asset liquidation during proceedings. In short, while declaring bankruptcy is certainly not a decision to be taken lightly, it can provide a chance for both individuals and businesses to turn their financial situation around and start anew.

Bankruptcy vs Debt Settlement

When faced with overwhelming debts, filing for bankruptcy or seeking debt settlement may seem like the only options. However, it's important to consider the consequences – both choices will have a significant negative impact on your credit score. Bankruptcy involves going through the court system, while debt settlement typically involves private negotiations between an attorney or debt settlement company and creditors. It's important to remember that there are other options available, such as seeking help from a social worker or counselor for emotional support and finding ways to better manage your finances in the future.

Freedom from certain debts: Chapter 7 bankruptcy wipes out many kinds of debt, including:

• Credit card debt
• Medical bills
• Personal loans
• Civil judgments (except for fraud)
• Past-due rent
• Past-due utility bills
• Business debts

When filing for bankruptcy, it's important to remember that not all debts can be erased. Child support and recent tax debt are just a couple examples of obligations that cannot be relieved through the bankruptcy process. Student loan debt, on the other hand, can potentially be discharged, but this is extremely rare and often requires demonstrating undue hardship. However, even if your most troublesome debt cannot be discharged, wiping away other debts can create space in your budget to focus on paying off what remains.

Hiring A Bankruptcy Attorney

Hiring an attorney to guide you through the process can ensure that all necessary steps are taken correctly, but this can be a financial challenge as most attorneys require payment upfront. It may be worth reaching out to local resources such as legal aid services or the bankruptcy court to see if pro bono options are available. Otherwise, finding a way to pay for professional assistance may end up being worth the cost to protect your future financial stability.