Posted on: 23 July 2015
When you're overwhelmed by credit card bills, collection agencies, and financial stress you may be considering bankruptcy - but you're worried that bankruptcy will ruin your credit forever and keep you from fulfilling your dreams of owning a home or car. However, there are positive effects of bankruptcy. Here are the top five reasons why bankruptcy isn't always a bad idea:
1. Delay Foreclosure
Filing for bankruptcy will delay a foreclosure which will keep you in your house longer. When you file, the court issues an automatic stay. The stay prevents creditor actions including foreclosures. Even if your home is scheduled for sale, bankruptcy may delay this action depending on your state and how fast you declare. Delaying foreclosure gives you time to look for an affordable rental and save money for moving costs.
2. Halt Garnishments
An automatic stay doesn't just stop foreclosure, but it also stops garnishments. The only types of wage garnishments that aren't stopped by the automatic stay are child support and alimony payments.
If the debt that led to the garnishment is discharged by the bankruptcy, the garnishments will not resume once your bankruptcy is granted. However, if the garnishment is due to student loans, the garnishment will resume once the stay is lifted.
3. Build Credit
With bankruptcy, you have the opportunity to recover and rebuild good credit faster. Even if you're making payments, if your debt keeps building and you live paycheck to paycheck, your credit takes a hit. It will take you longer to get caught up and rebuild good credit. By declaring bankruptcy, you're clearing debt and getting rid of monthly payments which will give you the breathing room that you need to use credit responsibly.
4. Catch Up
When your bankruptcy clears your debt you get a financial fresh start. You can use the money that would go to creditors to pay for other bills like student loans and utilities. You will finally have the ability to catch up and even get ahead. Use the opportunity to save money for an emergency fund so you won't have to go into debt in the future to pay for expenses such as car repairs.
5. Keep Assets
Declaring bankruptcy allows you to keep assets such as your home, car, and retirement accounts. If you don't declare bankruptcy creditors may seize these assets in a lawsuit depending on the state that you live in. You may also need to sell some assets to make payments or prevent garnishment.
Bankruptcy can have negative effects but not all the effects are bad. For more information, contact a professional like Jeffrey S Arnold Attorney At Law P.C.Share