There are many consumers that avoid bankruptcy at all costs, believing it to be a last resort method of resolving a bad financial situation. There are many more that remain unaware of the true benefits that bankruptcy holds for all types of debtors. Below we outline the top benefits of bankruptcy and how they can assist filers in gaining the fresh financial start they deserve.
Avoiding Lawsuits From Creditors
The most immediate benefit that can be gained by bankruptcy is the ability to avoid lawsuits from creditors and lenders. As soon as someone filed their bankruptcy papers, automatic stay is put into place, which prevents any creditors or lenders from taking any collection actions against you. The most notable actions that automatic stay protects bankruptcy filers from include:
- Wage garnishments
Not only is it activated immediately, but it remains active for the entire duration of the bankruptcy process. It provides filers the time they need to complete their bankruptcy with the peace of mind that their property and wages will remain untouched while they pursue a discharge or finish their payment plan.
Bankruptcy Eliminates Debt
The biggest and most notable benefit of bankruptcy is that it can wipe out large amounts of debt. Within the two main types of bankruptcy (Chapters 7 and 13), a debtor has the capability to have most of their debts discharged permanently or paid them off within the life of the bankruptcy. Here is a brief overview of how these chapters eliminate debt:
- Chapter 7: Utilizes the liquidation of certain non-exempt property to pay off existing debts through a discharge
- Chapter 13: Filers will spend a period of 3-5 years paying off their debts through a court-approved payment plan without the liquidation of their assets. It is also very likely that a filer will gain an additional discharge through this chapter
There are certain types of debts, however, that can and cannot be discharged by bankruptcy that you can learn about here.
There is a new law in California that allows bankruptcy filers to protect a much larger amount of equity in their home than the previous legislation. With an exemption amount far larger than it was previously, it makes it almost impossible for creditors to force the sale of the home, which takes away one of the biggest worries that potential bankruptcy filers have. You can learn more about the specifics of this new law here.
Your Credit Score
One of the biggest misgivings that people have about bankruptcy is the belief that it will tank their credit score beyond repair. With some filer’s scores even hardly changing at all, this simply isn’t the case. Though there is a slight dip in credit, depending on which chapter is filed for, the change in score following the bankruptcy is much more significant.
Not only is there a fresh start in terms of the debts being wiped away, but filers also gain a fresh start when it comes to their credit. Through resources such as secured credit card accounts, those who successfully complete their bankruptcies have the opportunity to efficiently rebuild their credit enough to purchase a car or even a home after the process is over.
Provides an Honest Fresh Start
Once the bankruptcy process concludes, filers have a genuine opportunity to start with a clean financial slate. With the majority of debts either wiped out or paid off, there are no more unpaid debts looming over their heads. Once all dischargeable debts are eliminated and good financial habits are put into place after bankruptcy, staying out of debt becomes a much easier goal to reach.
Contact Our California Bankruptcy Team Today
We are fully aware of the stress that people can feel when it comes to their finances. We are dedicated to making sure we find creative and effective solutions to help gain financial independence for our clients.
If you are considering bankruptcy as your primary debt relief option or simply want to learn more, take advantage of your free consultation by contacting us today through our website or give us a call at (818) 805-1758!