Bankruptcy gets a bit of a bad rap, especially in popular culture. In tv shows or movies, bankruptcy is seen as the end of the road, the death of someone’s dreams. While that can be the case sometimes, bankruptcy is actually meant to be a tool that allows people to get back on their feet and start over. It also serves as a legal protection in some cases, but it is not something to jump into without a thought. There are some serious consequences that accompany bankruptcy. But at what point should the pros outweigh the cons?
Consolidate Your Debts
Owing a lot of debt to a lot of different companies can be confusing, especially when it comes to making payments. They all have different due dates and it can be fairly easy to miss one without even realizing it. As a general rule, debt consolidation can be complicated, and some companies may not be willing to work with you. But when you are consolidating your debts under a bankruptcy, the process is much smoother. Additionally, if you make the set payments, your debt will be forgiven, even if the payments didn’t cover the whole debt.
Avoid Foreclosure
If you get far enough behind on your mortgage payments, your lender may start the foreclosure process to recoup their money. Once they have opened the foreclosure process on your home, you don’t have a lot of options to keep your home. Bankruptcy is one of the few things you can do to keep your home. Once you file for bankruptcy, there is an automatic stay placed on the foreclosure proceedings. Depending on the type of bankruptcy you file for, the stay may be temporary or permanent. You will need to act quickly if you are trying to save your home because the stay won’t help you if your lender has already sold your home. At that point, there isn’t anything you can do.
Stop Debt Collection
When you get behind on your debts, the people you owe money to have several ways to collect that money from you. They can garnish your wages, sell your debt to a collection company, or take legal action against you. All of these things come with serious consequences and can you’re your life quite miserable. Similar to foreclosure, filing for bankruptcy will place an automatic stay on all of these methods. This will give you time to get things together and, depending on the type of bankruptcy you are dealing with, you will either liquidate your assets to pay off your debt or start a repayment plan to pay off your debt. Either way, you will be in a better place and you can start to move on with your life.
The type of bankruptcy you can file for and the kind of benefits that you can get will depend on your individual circumstances and what kind of debt you are dealing with. It’s important that you consult with professionals before you make any final decisions.
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