How Bankruptcy Can Improve a Person's Financial Situation
mikal jason
A person who files for bankruptcy can regain their financial footing by following a simple budgeting plan. This can be done with a budgeting app or by creating a spreadsheet.
It’s also important to establish a savings account with a high yield. You may need this money for necessities such as food, clothing or shelter once you file for bankruptcy.
1. It’s a Second Chance
Bankruptcy offers debtors the opportunity to wipe out most types of unsecured debt or enter into a repayment plan with better terms. It also stops creditor harassment, debt collection lawsuits and wage garnishment, although a record of bankruptcy remains on one’s credit report for 7-10 years.
In the bankruptcy process, debtors are allowed to keep certain assets — known as protected assets — such as household furnishings and appliances, tools of the trade and vehicles up to a specific value. Non-exempt assets must be “realized” or sold so that the trustee can distribute the proceeds to creditors. Bankruptcy also stops foreclosures, evictions and car repossessions.
Despite the negative social stigma, bankruptcy is an excellent way to get out of debt. However, it should be considered a last resort when all other options have been explored. Alternatives to bankruptcy include personal budgeting, debt consolidation loans and working with a credit counselor to arrange a payment plan.
2. It’s a Fresh Start
Depending on your circumstances, bankruptcy can be an excellent way to get out of debt. It can also help you get back on your feet financially and begin a new chapter in your life. Bankruptcy is not without consequences, however, and should only be used as a last resort. For example, you may have trouble renting a home or getting a job after filing for bankruptcy, because it is public record and can show up on background checks. In addition, you may be denied credit cards or loans because of your bankruptcy.
There are two types of bankruptcy, both of which can relieve your debt and provide you with a financial fresh start. However, it is important to remember that bankruptcy will still affect your credit score and does not erase all of your debt. You can still be held responsible for child support, alimony, most back taxes and student loans. It is also important to make sure you have a plan in place to avoid bankruptcy again in the future.
3. It’s a Way to Avoid Foreclosure
If you’re facing foreclosure, bankruptcy could be a solution. Bankruptcy can stop creditors from garnishing your wages or repossessing your property and it stops
debt collectors from harassing you for as long as the bankruptcy process lasts.
The type of debt you have will determine whether or not bankruptcy is a good option. For instance, bankruptcy does not discharge alimony, child support or most back taxes and student loans are generally non-dischargeable as well. The bankruptcy process also liquidates assets and awards the proceeds to creditors, so you may lose valuables such as investments or equity in your home if their value exceeds what you’re allowed to keep under bankruptcy exemptions.
It’s important to consider your future financial goals when considering bankruptcy. If you want to purchase a house or car, or you need a clean credit report to secure a job in certain professions, bankruptcy may not be the right choice for you. A knowledgeable bankruptcy attorney can help you explore other options for achieving your debt relief goals.
4. It’s a Way to Rebuild Credit
Since filing for bankruptcy wipes most, if not all, of an individual’s debt history clean, it can help them improve their credit report over the long term. However, it’s important to focus on paying bills timely post-bankruptcy.
The bankruptcy process also protects certain types of property, such as a home and vehicles up to a certain value, and some personal belongings. However, if you own any assets of significant value, it’s important to consult an attorney to discuss how to proceed with filing. In Harrisburg, PA bankruptcy lawyers will be able to guide you through the bankruptcy process and legally be able to help you with all the correct information to help clear your debt.
Bankruptcy can also stop creditors from harassing an individual, which is often a priority for people who are struggling to repay their debt. The automatic stay that results from filing for bankruptcy will stop debt collectors from calling or contacting individuals, and it will give them time to sort out their financial obligations and make decisions about what to do with the debt. This could save an individual a lot of stress and anxiety over the long term.