You probably remember watching Wheel of Fortune as a kid: the wheel would land on that evil-looking, black BANKRUPT section, a terrifying noise would play, and everyone from Vanna White to the audience members would look sorry for the contestant who just lost all of the money they had built up on that round.
Bankruptcy has long been stigmatized in the world of finances, maybe even partially due to game show dramatics. However, it’s not a dirty word anymore. Hundreds of thousands of individuals file for nonbusiness bankruptcies each year. In fact, declaring bankruptcy may be the exact thing you need to get back on track and leave your financial struggles behind.
What is Bankruptcy?
Bankruptcy is a legal process initiated when a business or individual finds themselves unable to pay their due debts or other financial commitments. During the proceedings, a debtor has their assets calculated and assessed to be used to pay back some of the unpaid debt.
In theory, the ability to file bankruptcy aids the economy by giving people and companies a new start. The debtor is allowed to earn access to credit while simultaneously providing creditors with a portion of the outstanding debt.
How Can Bankruptcy Benefit Me?
- Put a stop to evictions, wage garnishments, utility shutoffs, and foreclosures (in some cases)
- Improve credit by improving the debt/income ratio; having debts discharged can happen automatically, meaning a debtor’s credit will go up even if the bankruptcy is on the record for 7-10 years.
- Hold on to certain assets and manage payments in smaller sums.
- Trigger an “automatic stay,” which keeps creditors from taking action to collect debts, such as repossessing personal property, suing the debtor, or hounding the debtor with letters and phone calls.
- Start fresh and feel mentally free.
- Allow a debtor to discharge some obligated dischargeable debts.
- Learn to live within your income and prevent future financial catastrophes
- Gain access to monetary counseling and learn tools to better balance debt and manage finances
Bankruptcy allows a person to step away from debts, overdue bills, job loss and under/unemployment debts, and other overwhelming situations with a much clearer path toward financial health and well-being.
What Are the Downsides to Bankruptcy?
If you file bankruptcy, your credit report will be affected for up to ten years. This could make it difficult to make large personal purchases and be approved for a loan for a time. Though in today’s financial market, with bankruptcy more and more common, a creditor is much more likely to forgive or disregard a bankruptcy filing in your past. Also, there are some types of debts that bankruptcy will not eliminate from your history. Someone who is struggling with student loans and tax debts may not gain as much benefit from filing bankruptcy.
How Can You Make Sure Bankruptcy is the Right Move for You?
If you’re even considering filing for personal bankruptcy, now is the time to speak with a bankruptcy attorney who will walk you through your options and help you decide if bankruptcy is right for your situation. Our law office is here to advise you on this topic. Schedule a consultation today at (805) 244-5291.