There's a bankruptcy myth floating around that says most Americans who file for bankruptcy do so because they lived a lavish lifestyle and spent beyond their means. However, according to a 2013 CNBC report, more than half of all bankruptcies are initiated due to medical bills. The stereotype of people filing for bankruptcy because they spent too much and got in over their heads with credit cards no longer applies in today's economy. Here are some of the ways bankruptcy can help those who face debts they're unable to pay:
Debt discharge
The most evident advantage of filing for bankruptcy is that it forgives many forms of debt, including credit cards and medical bills. This means you're no longer responsible for paying them, giving you a clean slate. Giving yourself a clean slate will allow you to get your personal finances in order and under control. This should help you reduce any stress you have over your money as well as any family stress that might be present. Then finally the day that you make it out of debt, you may find yourself with an overwhelming sense of freedom.
Debt reorganization
There are several types of bankruptcy, and not all of them wipe away debt. If you file for Chapter 13, your debts can be reorganized and consolidated into a more manageable solution for repayment. Though this may not be as good as getting your debt completely forgiven, it will still allow you to get your finances in order in order to pay off your remaining debts. Think of it as a long-term strategy to getting yourself to be debt free and out of bankruptcy within a certain period of time.
End collection harassment
Creditors are probably the worst part of being in debt. However, if you have to file for bankruptcy, one of the most immediate advantages of bankruptcy is that the court will issue an 'automatic stay,' which legally blocks menacing creditor and collection agency phone calls and letters that rob you of peace of mind. Being in bankruptcy and massive amounts of debt is horrible and you feel horrible. It creates tremendous stress on you and anyone that might be around you. Peace of mind is important while you are trying to recover financially. The last thing you will need is harassment from those mangy creditors even if it is their job to come after for the debts you owe.
Stop foreclosure and repossessions
A common misconception is that you will lose all of your property when filing for bankruptcy. However, there are federal and state bankruptcy exemptions that allow you to retain your house and even personal property such as jewelry. Bankruptcy consulting firms are a rich resource regarding bankruptcy laws. Consulting firm like Exelby & Partners Ltd. can assist you with the bankruptcy process and help you retain as much personal property as possible.
Stop wage garnishments
Some forms of bankruptcy can even put an end to wage garnishments. Again, a bankruptcy firm will know how to legally stop such a garnishment.
Financial advisor Suze Orman gives the following advice about filing for bankruptcy: "When somebody really doesn't have money to pay their bills then they should claim bankruptcy and face it right on and start all over again." In fact, in a recent interview with Oprah Winfrey, Orman concluded, "You just need to know that your credit will eventually recover, and it's not that big a deal." The various bankruptcy options available are an effective means of assisting those who struggle with debt and often are unable just to meet everyday expenses.
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