When it comes to filing for bankruptcy, many people are scared about the long-term consequences it will have on their credit history or future employment prospects. There is a lot of fear-based information out there about bankruptcy, mostly generated by the credit and loan industry. That makes sense when you think about it – they want you to keep paying something to them no matter what the consequences for the consumer, so they emphasize the negative consequences and make filing sound like it’s the end of life. It’s not. Here are four reasons why bankruptcy is better than doing nothing when you’re facing overwhelming debt.
1. Get A Fresh Start. Whether you made a series of mistakes, bad choices, or are the victim of unforeseen circumstances (divorce, disaster, illness, job loss, etc.), you’re overwhelmed by what seem to be insurmountable debts. You can’t go on and it seems like there’s no way out. If you’re feeling like that, you need to realize that bankruptcy laws were designed to help you make a fresh start. Yes, your credit history will be damaged, and yes, some future employers may see the bankruptcy if they check your credit report, but neither of those are insurmountable barriers when compared to the pain you will suffer by continuing to do nothing.
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2. Avoid Future Losses. Let’s say your debts are all unsecured, meaning there’s no collateral attached to them. This would include credit cards, store accounts, medical bills and so on. If you do nothing, one or more of those creditors may sue you. If they win the lawsuit, then they can start looking for property you own that could be sold to pay them off. Luckily, there are protections on some property, such as certain amounts of equity you’ve built up in your house or your car.
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As long as your equity is under those thresholds, which vary by state, the creditors can’t go after the property. But the judgment stays in force for 10 years. If your equity during that time ends up above the threshold, then the creditor can force you to sell it and apply any funds above that threshold to the debt. You could end up losing your house or your vehicle. If you file for bankruptcy, though, that same property is still protected. If you file a Chapter 7 and your equity is under the thresholds, you’ll probably be able to keep your house and your car and have all that unsecured debt discharged, completely and forever. That’s why the advice of an experienced bankruptcy attorney can help you navigate a complicated situation effectively.
3. Stop the Harassing. If you fall far enough behind on credit cards and other debts, they’ll be sent to collection agencies. The agencies will relentlessly pursue you. People will call you day and night at home, and then they’ll start calling you at work. Some of them will be rude and belligerent, and they are amazingly persistent. The beauty of bankruptcy is the “automatic stay.” As soon as your filing is official, all such collection activities must stop immediately.
4. Pain Now or More Pain Later. If you declare bankruptcy, the negative mark on your credit report will likely affect you getting new credit or loans. But it will go away within 10 years. You will also be surprised that many lending companies are more than willing to extend you credit, even in spite of your bankruptcy filing. After bankruptcy, you can rebuild your credit with careful strategies and smart spending. Your FICO score may increase more quickly than you think.
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If you’re facing a difficult financial situation and are feeling stuck, reach out and book a free consultation with a qualified bankruptcy attorney. Learn more about your options, and whether bankruptcy or a debt restructuring is the right solution for you.
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