Bankruptcy is often viewed as a last resort and as something negative. While it is true that going bankrupt isn't ideal, the reality is that it is much better than a lot of alternatives. There are significant benefits to bankruptcy which cannot be understated for people who are in debt. If you are concerned about your financial situation and are struggling with money, you should take the time to learn about bankruptcy benefits so you can make the most informed choice about how to address your money issues.
Bankruptcy Benefits
There are many advantages to declaring bankruptcy, including the following:
- Bankruptcy ends collection efforts. If you're in danger of repossession or foreclosure, the proceedings against you must stop at least temporarily. Wage garnishment and other collection efforts can be permanently ended by bankruptcy because you can address the underlying debts.
- Bankruptcy puts a stop to financial stress. If you're being called by creditors and facing lawsuits, this can cause significant stress that affects your health and your relationships. You won't have to worry about that any more once you have been proactive and dealt with your debt through a bankruptcy filing.
- Bankruptcy allows you to stop wasting money. In some cases when you are seriously in debt, your payments may not even cover interest. You're just throwing away money in this case on a debt you'll never pay down. Even if this isn't your situation, if you have debts that will take you years to pay you could end up spending a fortune and not accomplishing other important financial goals. By allowing you to reduce balances or avoid repayment of a large portion of the debt, you can avoid this undesirable outcome.
- Bankruptcy protects important assets. You can usually keep your house in bankruptcy as long as you stay current on the mortgage. Retirement accounts are safe too. This is why you never want to cash out a 401(K) to try to repay debts and why you don't want to take a second mortgage or home equity loan to repay credit cards.
- Bankruptcy can help you improve your credit. While many people think bankruptcy destroys your credit, it can actually be the first step in rebuilding. When you go bankrupt, you can stop negative info from being posted each month and you can begin the process of making payments on a new secured card or other debt you take on after the bankruptcy. Your credit score should start to go up quickly.
These are some of the key advantages of bankruptcy enjoyed by virtually every debtor. You may also get other benefits of bankruptcy that are specific to your situation. You should speak with an experienced bankruptcy attorney to find out whether bankruptcy is the right financial choice for you.