Bankruptcy: Three Key Benefits
No matter how difficult your financial situation is, you probably want to avoid bankruptcy because it will damage your credit. But there is also a positive side to bankruptcy that anyone in dire financial straits needs to consider. Even though your credit rating will take a major hit, bankruptcy can also help you in several crucial ways. The following article takes a look at this important topic.
Automatic Stay
If you are at the point where you are considering filing for bankruptcy, then it's virtually certain that you are deeply in debt and very likely that your creditors are pressing you for payment. Perhaps your creditors are even threatening to take you to court and obtain a judgment against you, which would place your personal property at risk.
One big advantage of filing for bankruptcy is that it freezes the actions of your creditors by placing an automatic stay on much of your outstanding debt. The stay prevents your creditors from attempting to collect your debt in any way, whether by calling you to demand payment, attempting to foreclose on your property, or trying to garnish your wages
An important point to keep in mind is that some debts will not fall under the protection of the automatic stay. Typically, this involves certain tax debts, child support, and student loan debt.
In some instances, creditors might be able to lift the stay for certain debts, if they can get the judge to agree with their request.
Eliminate Debt
The main reason that most people file for bankruptcy, of course, is to cancel their legal obligation to repay their debts. If your bankruptcy petition is accepted, then most of your debts will be discharged and you will not have to worry about them anymore.
Just as with the automatic stay, however, certain debts cannot be eliminated through the bankruptcy process. One type of debt that does not qualify for discharge is a debt incurred by fraud. For example, if you lied on an application to get a loan, the bankruptcy court may rule that you committed fraud and that therefore the debt cannot be eliminated.
Payment Plan
If your financial problems are temporary and you have the means to pay off all or a large portion of your debts in three to five years, then filing for Chapter 13 bankruptcy can allow you to get back on your feet. Under this section of the bankruptcy code, you can set up a payment plan to satisfy your creditors as long as the bankruptcy court approves of the plan.
To learn more about bankruptcy, talk with a bankruptcy attorney at a firm like Merna Law near you.