For example, it affects your credit report for the next seven to ten years, and it can be difficult to get loans after filing. However, bankruptcy isn’t all bad. In fact, it has many benefits to it, which is why so many turn to it when they are struggling.
Here are four of those benefits.
Your Credit Score Will Typically Rise
The whole reason behind filing for bankruptcy is that you’re so deeply in debt that you can’t keep up with paying them your bills. This causes your credit score to drop significantly. In fact, it can cause your credit score to plunge deep into ‘bad credit’ territory.
When you file for bankruptcy, however, the same debt you’re struggling to pay is erased when it’s discharged by the bankruptcy. This means that the debt that is ruining your credit no longer exists and this causes a bit of a rise in your credit.
It also gives you the chance to start rebuilding your credit, which will usually see improvement over the next 12-18 months. There are no guarantees on exactly how much or when your credit score will rise, but most people see this increase.
You Get Credit Education
Bankruptcy law requires that anyone who files for bankruptcy must get some credit education. This is a great benefit for you because it will allow you to look back at how you got into this position and look forward to how you can avoid being back in this same position in the future.
You’ll not only learn to avoid bankruptcy again but also how to improve your credit and finances overall.
No More Collections Calls or Letters
Filing for bankruptcy creates an "automatic stay." This means, once you have filed for bankruptcy, all your creditors and all the collection agencies they’ve contracted with must stop contacting you.
It also means they can’t file (or continue) a lawsuit against you for the debt. If they’re garnishing your wages, that also must stop.
They can’t do anything else regarding the debt until your bankruptcy is complete. Of course, there are some debts that this does not apply to.
For most, however, all collection efforts need to stop once you file, and if the debt is erased, so is their lawsuit, any wage garnishments, and any other attempts to collect on the debt.
Freedom From Certain Debts
You’ll still have to pay back child support, recent tax debt, and most student loans are debts regardless of the outcome of your bankruptcy. But most other debts, including credit card, personal loans, civil judgments, past-due rent, and medical bills will all be eliminated in your bankruptcy.
You’ll get a totally fresh start.
When you decide to file for bankruptcy, it’s usually recommended that you talk to a bankruptcy attorney. Bankruptcy law can be complicated.
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The right attorney can guide you through the process to help ensure that everything is completed and filed correctly and by the deadlines. They can also give you advice about what your next steps should be and what you can expect moving forward.
Many people consider filing for bankruptcy as a sign of failure. Medical expenses, unexpected bills, or a lost job are all things outside of your control that could lead some people to bankruptcy.
However, filing for bankruptcy is not a financial death sentence, even if it feels like one in the short term. In fact, filing can be an excellent opportunity for a fresh beginning that sets you up for better financial stability going forward.
And that’s a freedom money can’t buy.
Image Credit: benefits of bankruptcy by envato.com
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