There are a number of reasons why people may need to file for bankruptcy. Medical bills, divorce, job loss, significant loss of income and unaffordable debts are common reasons. However, many people have the wrong idea about bankruptcy.
Some people who may benefit from bankruptcy protections may wait to file for the wrong reasons. It is a common belief that you lose all of your assets in bankruptcy. Another common belief is that bankruptcy permanently affects your credit. These common misconceptions can be responsible for making a difficult financial situation even worse.
Bankruptcy is not for people with nothing to lose, it is for people who have assets they want to protect. Depending on your specific financial situation, waiting to file could put your finances in worse shape and may even allow creditors to begin seizing your most important assets.
Bankruptcy Protects You From Most Creditors
An automatic stay goes into effect when you file for bankruptcy. Once the automatic stay is in effect, creditors must halt collection attempts. Most wage garnishments stop. Creditors can no longer seize your home, vehicle or other important property to satisfy your debts.
Think about why this is so important. If you have a car that you rely on to get to work, an automatic stay ensures that you keep your vehicle. Waiting to file may mean the creditor can seize your vehicle, which could lead to job loss or other financial pitfalls. An automatic stay can also prevent foreclosure on a home, even at the 11th hour.
Bankruptcy Gives You Options to Discharge Debts
Bankruptcy can discharge debts that are destroying your finances. If consumer debts are the source of your problems, then you are likely going to choose between Chapter 7 or Chapter 13 bankruptcy. These options differ, as does eligibility. Some debtors will not qualify for Chapter 7 while others may not qualify for Chapter 13.
With a Chapter 13 bankruptcy, you would repay a portion of your debts through a three to five-year repayment plan. You would also not have to deal with pesky creditors. The trustee assigned to your case would send them the payments.
Both options have differences, so we encourage you to speak with one of our attorneys if you have questions.
Regardless of the option you choose, bankruptcy can help you protect your most important assets while discharging debts that caused you problems in the first place.
Bankruptcy Confronts Your Financial Situation
Ignoring a difficult financial situation will not make it go away. Eventually, you are going to have to choose a solution to get out of debt. Otherwise, it could become far more difficult to access future lines of credit, qualify for certain types of employment, or secure housing – even in an apartment.
Waiting to file could mean creditors hit you with more fees. It could also mean that your credit scores take a larger hit. When you default (or even make late payments) on multiple debts due to an inability to pay, the lenders for those debts report you to the credit bureaus. This will also have a long-term negative effect on your ability to access future credit or qualify for certain types of employment.
We find that in most cases, our clients are able to begin rebuilding their finances shortly after filing for bankruptcy. Prior blogs discuss how to improve your credit scores after your case concludes.
Contact Our Kansas City Bankruptcy Attorneys for More Information
Each bankruptcy case varies depending on the filer’s financial situation. We encourage you to contact us to learn more about which debt relief options can improve your finances. The Kansas City bankruptcy attorneys at The Sader Law Firm can review your situation and help you determine which options are available as well as the benefits of those options.