The advantages of filing for personal bankruptcy

February 09, 2013 (Press-News.org) The advantages of filing for personal bankruptcy

Article provided by Guthrie Law Office
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Even now, in the years following the "great recession," when many people have found themselves in dire financial straits, many who could qualify for a personal bankruptcy would still never consider filing for one. First, they think of the stigma attached to it. Then, if they can get past that, they contemplate the effect of a bankruptcy filing on their credit report and that fact stops them in their tracks.

But when someone is struggling with debt, what is easy to overlook is that if they cannot pay outstanding debts they've already hurt their credit, and continuing to be late with monthly payments -- or not be able to make them at all -- will only do more harm.

When viewed in that light, personal bankruptcy might begin to look like what it really can be -- a fresh start.

Consider these advantages to personal bankruptcy
-The automatic stay: The automatic stay prevents all collection efforts against the debtor who files for bankruptcy, allowing the bankruptcy to progress unhindered. This lets debtors deal with their assets in an organized way, with the help of the bankruptcy court. Once the automatic stay is in effect, the debtor's assets cannot be attached, the debtor's wages cannot be garnished and the debtor's property cannot be foreclosed upon. Creditors who violate the automatic bankruptcy stay could be held in contempt of court. Creditors who have been held in contempt risk losing the chance to recoup at least some of their losses at the termination of the bankruptcy case.

-Discharge of debts: While the automatic stay is helpful for a debtor with a number of outstanding obligations, the ability to discharge, or eliminate, a number of debts under certain chapters of the bankruptcy code is of the greatest potential benefit. A debtor can file for personal bankruptcy under various chapters of the bankruptcy code, such as Chapter 7 or Chapter 13, and these chapters provide different remedies tailored to debtors in different situations.

Not all debts -- for example, child support or student loans -- can be discharged. But some debts that are not discharged may be modified or reduced. It might even be possible to reduce federal tax debts by negotiating with the Internal Revenue Service during the bankruptcy proceeding.

Contact a bankruptcy attorney to learn more

If your debts are piling up, you're struggling to keep up with your payments and feel like you're running out of options bankruptcy can be the fresh start you need. To find out if bankruptcy is the choice for you, and to get expert guidance to choose the right type of bankruptcy for your specific financial situation, contact an experienced bankruptcy attorney.