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What Are the Benefits of Bankruptcy?

Bankruptcy has become associated with a homeowner’s worst fears due to the stress and financial problems that it seems to entail. Furthermore, many people see bankruptcy as a failure or admittance that they could not handle the responsibilities of adulthood. This is a mistaken perception.

While bankruptcy should not be taken lightly, this financial decision often is a lifeline for debtors who are in over their heads. In fact, when done correctly, bankruptcy offers you a way out while keeping your dignity and getting a chance to start over with a clean slate. Since so many people focus solely on the negative sides of bankruptcy, we wanted to illuminate the six biggest benefits of bankruptcy.

Top Benefits of Bankruptcy

  • Creditor harassment will stop right away. Because a bankruptcy triggers an automatic stay, that is, a court order requiring creditors to cease contact with you during the proceedings, you will experience relief from the many collection calls and letters as soon as you file for bankruptcy. You will similarly be protected from any potential lawsuits from creditors. Since one of the most stressful elements of debt is the barrage of creditor demands for payment, bankruptcy offers much-needed relief.
  • Most (and in some cases, all) debt will go away for good. In both Chapter 7 and Chapter 13, your unsecured debts are discharged, including medical bills, credit cards, and other unsecured loans. In a Chapter 7 filing, this takes only about 90 days. In a Chapter 13 filing, it takes longer, and you will have to pay some of that debt off through a structured plan. Still, after three to five years, you are cleared of any withstanding debts. Although some debts are not included in the list of dischargeable debts, most will go away, freeing you.
  • In most cases, you will be able to keep your house and other beloved personal belongings. Despite the popular perception, a bankruptcy doesn’t mean that all your property will be auctioned off. You are generally allowed to keep most of your possessions under various exemptions, so long as you work with your bankruptcy attorney to make your priorities clear.
  • Your credit score can start to recover. While many people assume that bankruptcy ruins your credit forever, because it stays on your credit report for seven to ten years, the opposite is actually true. Since your credit score takes a hit every time you fail to pay your bills and is similarly hurt by large amounts of debt, a bankruptcy actually helps your financial health in the long run. Once your debt is discharged, you will be able to start building credit again right away. You can learn more about your credit after bankruptcy.
  • Your privacy will be respected. In most cases, bankruptcy filings are not known by anyone but your creditors. Although a bankruptcy theoretically will be a part of the public record, in reality, very few people ever find out. Plus, 1 in 10 people nowadays file for bankruptcy, eliminating much of the perceived stigma.
  • You get a clean financial slate. Filing for bankruptcy allows you to start to move on. You can start over and prove yourself worthy of credit. Often people bounce back quickly, especially after completing the required finance courses.

When carefully considered, a bankruptcy can help you recover and get back on track financially. If you are in over your head with personal debt, a bankruptcy may be the solution you are looking for, but it is important to get professional help in evaluating the advantages and disadvantages for your particular case. At Luftman, Heck & Associates, our bankruptcy attorneys have years of experience helping debtors get positive outcomes in even complex bankruptcies. Call us at (216) 586-6600 today to set up a free consultation with a Cleveland bankruptcy attorney and find out how we may be able to help in your specific situation.