When you are drowning in debt, you cannot effectively accomplish any of your other financial goals. You cannot save for bigger purchases or build up an adequate emergency fund if you are putting all of your money into repaying debts with balances that will take you years to pay back. You may also have a difficult time finding money to save for retirement if you are forced to send all of your extra cash to your creditors.
If you are in debt, you should not have to compromise your chance at future financial security. One of the biggest benefits of bankruptcy is the ability to get out from underneath the debt and stop throwing away your money on interest, late fees and minimum payments. For some, the reality is that debt burdens you for decades, and might never get paid off. That’s why being proactive now helps. Bankruptcy can save you time, stress, and money.
Bankruptcy Can Help You Get Back on Track
Many people who are in debt are stuck in a trap from which it will take years to wriggle free. With a high debt balance, most of your payments that you send to creditors will go to interest and not to paying down the actual debt balance. If you are really struggling to pay your debt and you end up paying late, then a big portion of the money you send in will just go to late fees and will not reduce your balance. In some cases, debtors owe so much that their entire payment is eaten up by fees and penalties. If this is your situation, you could send in money to your creditors forever and never get out of debt.
You should also be concerned that if you buy property, put money into a savings account, or make other investments, your creditors could take legal action and try to get a judgement against you in court. This can leave you in a situation where you work for years to pay debt and have nothing to show for your labor at the end of that time because you weren’t able to save or acquire assets.
You also lose the opportunity to start saving early for your retirement if you spend years when you are young trying to pay off debt. Since your money may be going to creditors instead of your retirement savings, you’ll miss out on the chance to earn compound interest that helps your money to grow faster. You’ll only have to save more later to try to catch up, and you likely never will have as much as if you’d been saving steadily throughout your life.
Bankruptcy can help you to wipe out your debt without it hanging over your head for endless decades. With Chapter 7, you can discharge most of your debts quickly, and with Chapter 13 bankruptcy, you have a five-year repayment period, after which time remaining balances of debt are discharged. After your debt is gone, you can use your money to accomplish the goals that matter to you.