When you ask people about bankruptcy most people tend to say that they would never need it and it is only for those who mismanage their money. The truth is, financial crisis can strike anyone and the need for bankruptcy may not be far away. In such a turbulent economy many people have experienced the devastation of being laid off or having their salaries cut. Medical problems and divorce can also cause unexpected strain on anyone’s wallet, leaving many with few options for debt relief help. Bankruptcy shouldn’t be seen as an offense, but a tool for help. You might be surprised to learn that bankruptcy can provide many great benefits.
One of the most immediate effects of filing for bankruptcy is the issue of an automatic stay. An automatic stay order prevents creditors from contacting you during the debt negotiation process of bankruptcy. This means that creditors are legally prohibited from calling, sending letters or making face to face contact with you as long as you are in bankruptcy. Further, creditors who violate this order can be prosecuted and may face serious consequences. Many people find that having relief from creditors gives them the peace of mind needed to focus on their debt reduction plan.
The most obvious benefit of bankruptcy is debt relief. There are two types of debt relief available when you file for bankruptcy. A Chapter 7 bankruptcy can eliminate nearly all of your unsecured debts quickly and at little to no cost to you. A Chapter 13 bankruptcy can eliminate your unsecured and secure debts by developing a repayment plan that best suits your budget. By working to repay your debts in Chapter 13, people find that their secured debt assets are better protected.
Many people fear losing their assets like a home or car. Fortunately, bankruptcy can halt the foreclosure or repossession process. When you file for bankruptcy, all creditor collection and seizure actions must cease until the bankruptcy plan is complete. Assets in a Chapter 7 case may be at risk for liquidation, but you are generally given more time to develop a plan to pay for and keep the asset when you file for bankruptcy. A Chapter 13 case can provide nearly a 100 percent guarantee your assets will be protected, as long as you make your Chapter 13 payments according to schedule.