Have you ever wondered why other people are considering bankruptcy when there’s so much negativity surrounding it? Indeed, filing bankruptcy is not for everyone. But the sad reality is that those who should file, avoid bankruptcy due to the stigma. This article will provide you a fresh perspective as to why bankruptcy should be seen more like a “lifebuoy” that will get you out of deep debt, instead of an “anchor” that financially limits your movement. 

Negative Connotations on Bankruptcy Declarations

Most filers who feel that they’ll benefit from submitting bankruptcy petitions are hindered by feelings of guilt and shame. Seeing bankruptcy as a sign of financial failure is a common misconception. The truth is if you file a bankruptcy, it means you’re actively seeking a way to eliminate your debts and protect yourself from creditors who may have been harassing you for payments. 

Another misconstrued belief is that once you file for bankruptcy, you’ll ruin your future finances due to its impact on your credit report. Although it does affect your credit score, there are easy steps to rebuild credit after filing bankruptcy and it will actually improve your current financial situation by wiping out most of your debt. 

Bankruptcy is a Life Saver

when to file bankruptcyIf you are truly unable to give the minimum payments for your mortgages and loans anymore, then you are the best candidate for bankruptcy. When evaluating bankruptcy cases, the court will look at filers’ debt-to-income ratio to check if your earnings are less than what you owe, making it impossible for you to pay back your lenders. 

If you’re a minimum wage-earner and your family is suddenly faced with a medical emergency, bankruptcy can also save you from the stress of emptying all your savings account or having insufficient funds to cover medical bills, medicine, or therapy costs, especially when you have other financial obligations like a car loan, home mortgage, or student loan. Among the debts nonexempt from being discharged by the bankruptcy court is your credit cards’ outstanding balance. 

If you have saved up a good sum in your retirement account, personal bankruptcy can also save you from losing your most viable financial source once you stop working. Money in retirement accounts usually gets protection under bankruptcy laws as they are exempt from bankruptcy discharge. 

Bankruptcy is Debt Forgiveness

Instead of nailing your debts to a wall for your lenders and everyone else to see, a bankruptcy petition actually forgives debts and makes you forget your financial burden. It is not uncommon for other Americans to consider bankruptcy, with over half a million filing a case annually. 

To maximize the benefits of bankruptcy for you, study the different types of bankruptcy, also called chapters, and understand their implications.

When you choose Chapter 7 bankruptcy, your dischargeable debts get eliminated at the cost of giving up nonexempt properties to a bankruptcy estate for liquidation and to repay your lenders. Not all assets are seized as everyday items such as home furnishings and clothes are exempted. After bankruptcy, it generally stays on your credit record for a number of years which you can remedy by taking steps to prove that you are committed to paying future loans.

On the other hand, filing Chapter 13 may stay on your credit report for a shorter duration than a Chapter 7. However, choosing this type of bankruptcy means you have enough monthly income to pay back your creditors under an extension which is called a repayment plan. This gives you an extra three to five years to pay off debts free of interest. 

Regardless of which chapter you file, seek the advice of a bankruptcy attorney to determine the best lifesaver befitting your circumstances. You will need to initially cover bankruptcy costs such as attorney and filing fees, but you’ll get to save money in the long run by making the best bankruptcy decision early on. 

Start The Bankruptcy Process Today

Whether you’re facing income loss, high amounts of unsecured debts, staggering medical bills, the possibility of home foreclosure or divorce, lawsuit from creditors, or wage garnishments, filing for bankruptcy can be your lifebuoy to get out of these dark waters. 

An experienced bankruptcy lawyer from Phoenix Fresh Start Bankruptcy Attorneys can give you legal advice on how to prepare for the means test prior to filing bankruptcy and shall go over the list of your debts, assets, and properties before handing it over to the bankruptcy trustee who will manage your case.

Don’t miss your chances of regaining financial freedom and getting that fresh start. Contact one of our bankruptcy attorneys for a free consultation today!