Many people focus on the negatives of bankruptcy, such as a lower credit score. Although your credit rating does take a hit after declaring bankruptcy, it won’t stay that way forever. If you are struggling to pay down your debt, filing bankruptcy may have many benefits.
Here are some of the advantages of declaring bankruptcy.
Eliminate Your Debt
One of the main advantages of declaring bankruptcy is clearing most of your unsecured debts. If you file for Chapter 7 bankruptcy, you can wipe these debts clean and get a financial fresh start. If you declare Chapter 13 bankruptcy, you can repay your debts through a manageable repayment plan. Once your debts are discharged, you can finally get on with your life and sleep easier at night.
Avoid Foreclosure and Repossession
When you’re falling behind on your bills, you may worry about your house getting foreclosed on or your vehicle getting repossessed. If you file for bankruptcy, you may be able to avoid this. An automatic stay will be issued, which puts a stop to collection efforts. This will give you some extra time to make your payments current.
Receive Education About Finances and Budgeting
If you want to file for bankruptcy, you will be required to complete credit counseling first. While this might sound tedious at first, it can actually be very beneficial. In this course, you will learn how to create a realistic budget and manage your finances better so that you avoid getting in this situation again in the future.
Repair Your Credit
Some people are reluctant to file for bankruptcy because of the effect it will have on their credit. However, if you are deep in debt, it’s likely that your credit rating has already taken a hit. Although your credit score will be lowered after declaring bankruptcy, you can repair it over time. Make sure to pay all of your bills on time and keep your credit card balances low. If you can’t qualify for a traditional credit card in the beginning, get a secured credit card, which requires you to make a cash deposit. After you make timely payments on this card, you may qualify for a traditional credit card.
If you are thinking about filing for bankruptcy, you may want to schedule a consultation with a bankruptcy lawyer, like one from the Law Offices of Neil Crane.