Bankruptcy is a remedy for insolvency, yet many people struggling with debt never consider it. It is true that bankruptcy has a price and some unfavorable consequences, but it does provide an escape from money problems when you’ve already exhausted other options. Bankruptcy is a last resort or ultimate solution to overcome crippling debt and start anew. It has helped many individuals and businesses gain financial stability after hitting rock bottom. Filing bankruptcy is nothing to be ashamed of, as long you are not using it for fraud and malicious motives.
There are several informal ways to deal with a financial crisis that you may take into account first. Discuss you financial circumstances with Bankruptcy Attorney in Middletown, CT, to determine if filing Chapter 7 or Chapter 13 is right for you. Below are 5 ways that filing bankruptcy might help you overcome your financial crisis:
1. Debt Discharge or Concession
If you have loads of unsecured debt on your hands, Chapter 7 bankruptcy should probably solve most of your problems. Everything from outrageous medical bills to maxed out credit cards will be erased, so you only have to worry about paying off secured loans. Your bankruptcy trustee may liquidate non-exempt assets to compensate lenders. In case you don’t qualify for Chapter 7, you can still get rid of some debt through Chapter 13. Depending upon the condition of your finances, you shall have to pay a portion of your debts or reimburse in full over an extended time period.
2. Protection from Debt Collectors
The worst part of an economic deficit is confrontation with debt collectors. Once payment deadlines have passed, creditors aggressively begin to pursue you. They might even resort to threats or harassment when they don’t get their money. When you file bankruptcy, you gain automatic legal protection from all debt collectors. If they still try to contact you and demand what you owe, law enforcement will penalize them for violating the bankruptcy law. Your bankruptcy trustee will accompany you in official meetings with creditors and work out terms for compensation.
3. Customized Payment Plan
If you have a high and steady income, you would be eligible for Chapter 13. This is a reorganizational bankruptcy to help you pay off debt in a more convenient manner. Your bankruptcy trustee shall evaluate your finances to estimate available disposable income that can be used to compensate your creditors. They will help you establish a repayment plan that typically allows payment of debt in smaller installments over a longer period with no interest.
4. Automatic Stay
The bankruptcy court equips you with an automatic stay if you filed bankruptcy before receiving a legal notice of foreclosure, eviction, or repossession. Even after eviction is initiated, there is still a chance that bankruptcy might stop it. If your landlord has already obtained an eviction order against you, bankruptcy will make no difference. While Chapter 7 allows pausing a foreclosure or repossession, it does not prohibit liquidation of assets. You will eventually lose your home or car if you do not make up for outstanding payments in due time.
5. Financial Management
It is mandatory to take a credit counseling course before filing for bankruptcy and a second financial management course after you have filed the case. Bankruptcy court does not grant a debt discharge, unless the petitioner completes both courses. These courses are highly significant, and are commonly referred to as ‘debtor education’. You learn how to take control of your finances and prevent another debt-driven fiasco once the bankruptcy ends.