Benefits Of Filing For Bankruptcy
Benefits Of Filing For Bankruptcy
If you are dealing with serious debt issues, such as credit cards, house mortgage, and car payments, declaring bankruptcy can be a cost-efficient and efficient strategy. You must make sure, however, that you have an experienced bankruptcy advisor by your side to help you maximize the benefits of filing for bankruptcy.
Wipe Out Your Unsecured Debts
Keep in mind that bankruptcy covers only unsecured debts; unsecured debts are debts wherein the creditors don’t have a lien on any property and, thus, cannot repossess any of your assets in case of failure to pay. Except in the event of a special “secured” credit card, all of your credit card debts, among other unsecured debts, will be wiped out.
But it must also be emphasized that it will depend on the type of bankruptcy filed. In a Chapter 7 bankruptcy, your obligation to pay the balance on your credit card debt will be erased upon the successful completion of the case. But there are exceptions, such as in the event of fraud, which emphasizes the importance of good faith in a bankruptcy filing.
In a Chapter 13 bankruptcy, or a reorganization bankruptcy, you have to repay your creditors your debt, either in full or in part, for 3 to 5 years. Any unsecured debts remaining after completion of your repayment plan will be liquidated.
Stop the Harassment and Collection Activities of Creditors
Keep in mind that debt collectors are not allowed by law to harass debtors, such as repeatedly calling at unreasonable times (before eight a.m. and after nine p.m.); using obscene or profane language; using or threatening to use violence; and claiming your incarceration or threatening property seizure, among others. When filing for bankruptcy, you have the benefit of its automatic stay, which immediately goes into effect.
With an automatic stay, most of your creditors are prohibited from continuing their collection activities. But there are several exceptions to the automatic stay, not to mention that creditors also have the right to ask the bankruptcy court to remove it – and the court may allow it in certain circumstances.
Remove Certain Kinds of Liens
A lien, which refers to a creditor’s right to seize some or all of the debtor’s property, will usually survive bankruptcy unless certain procedures are invoked during the case. You can use lien avoidance to eliminate these liens, but there are exceptions to the rule, too.
In a Chapter 7 bankruptcy, your secured debt has two parts, which are treated differently:
1- Your personal liability is wiped out with the assumption that it qualified for discharge (i.e., the creditor cannot sue for collection in the future); and
2- Your creditor’s legal claim on the debt’s collateral will not be automatically eliminated by your filing of bankruptcy unless you take additional steps in eliminating or reducing liens on collateral.
With these benefits of filing for bankruptcy, you should seriously consider it now instead of finding alternative – and more expensive – ways of liquidating your debts. Your trustee in bankruptcy will be able to discuss your options in this matter and, hence, provide the best way out of your debt issues.
Benefits Of Filing For Bankruptcy
Benefits Of Filing For Bankruptcy
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