Bankruptcy is one of the many options debtors can take to regain financial stability. There are plenty of good reasons to consider bankruptcy; however, that doesn’t mean it is always the most suitable way of managing debt. After reading the following 5 reasons for choosing bankruptcy, consider whether it is the right route to take based on your own financial circumstances.
1. Automatic Stay on Collection Activities
An automatic stay is a mechanism of bankruptcy that prevents creditors from pursuing debt-collection activities. If you are being hounded by creditors or debt-collection companies, the automatic stay will give you space to breathe while you are going through the bankruptcy process. The stay becomes effective upon the filing of the bankruptcy in most cases.
Creditors who are bound by the automatic stay cannot:
- Bring or continue with judicial actions against the debtor
- Pursue foreclosure or repossession of property
- Create, perfect or enforce a lien against debtor property
Creditors can file a motion requesting relief from the stay. Depending on the circumstances, an agreement may be made to allow the stay to continue so long as certain conditions are met, or the motion may be denied or granted by the court.
2. Halt Pending Lawsuits
Debt collection lawsuits are stressful and time consuming. When you file for bankruptcy, in most cases you will be able to halt the lawsuit through the provisions of the automatic stay.
3. Stop Wage Garnishments
If you are struggling to live day-to-day, due to having your wages garnished, bankruptcy may provide you with relief from that financial strain. In most cases, filing bankruptcy will stop the garnishment and you might even be able to recover some of the funds garnished. With most creditors not having the power to continue to pursue debts during the bankruptcy process, you could have the opportunity to regain solid financially footing.
4. Prevent Foreclosure
One of the major risks of getting into debt is the threat of losing your home. If you are having trouble making mortgage payments, bankruptcy could be the right choice for you. In a Chapter 7 bankruptcy, you could potentially delay foreclosure for a number of months. However, a Chapter 7 does not provide a way to catch up on mortgage payments. Alternatively, you may meet the requirements for a Chapter 13 bankruptcy and end up saving your home from foreclosure by agreeing to a monthly repayment plan, based on the restructuring of debts, which can allow you to pay mortgage arrears over the time of the plan while continuing to pay your regular mortgage payments.
5. Discharge Debts
It is possible to discharge some or all of your debts in a Chapter 7 bankruptcy. If you wish to keep assets such as a vehicle secured by a loan, you may reaffirm that debt and continue making payments, and that debt no longer will be discharged. A Chapter 13 bankruptcy will allow you to create a repayment plan to pay some or all of your debt, the remainder of which may be discharged once the bankruptcy plan is completed. However, regardless of whether you file a Chapter 7 or 13, some types of debts, such as certain taxes, child support, and student loans, typically are not dischargeable.Bankruptcy is always a complex process, so it is important to consult with an experienced bankruptcy lawyer. To find out if you qualify for Chapter 7 or Chapter 13 bankruptcy, reach out to the offices of H. Lehman Franklin, P.C., at 912-764-9616 or via email us at firstname.lastname@example.org