What Are the Benefits of Filing Bankruptcy?

When times are tough, many people look into the possibility of declaring bankruptcy in order to obtain relief from their overwhelming debt. However, many financial counselors and well-meaning friends may overlook the benefits of filing bankruptcy and simply emphasize all of the disadvantages, such as the damage done to your credit rating and your financial reputation.

The truth is that anyone who cannot pay his or her debts off in the next three years or so while maintaining a reasonable standard of living should at least consider filing bankruptcy. If you fall into this category, you're going to have an extremely difficult time paying off your debts on your own unless you have a significant and sudden improvement in your earnings.

All too often, many people leave bankruptcy as a last resort, but they end up doing more damage to their finances in the process. For example, you might take out a home equity loan in order to pay off your credit card debt and avoid having to file Chapter 7, but then a couple of years go by and you find yourself still buried under a mountain of credit card debt. Perhaps you were undisciplined in your spending and once again accumulated lots of consumer debt even after you had obtained a home equity loan.

Or perhaps some emergency came along and you were not able to use all of the loan towards paying off your bills. In any case, it is not uncommon for a family to take out a home equity loan in order to pay off credit card debt and then find themselves still in debt a few years later. The difference is that a home equity loan has now put your house itself in jeopardy, and bankruptcy will not remove this kind of loan. So you see, some people go to great lengths to avoid bankruptcy but end up doing worse damage to their financial situation.

So what benefits can be gained if you file bankruptcy?

Well, filing for Chapter 7 bankruptcy will immediately give you some relief from creditors. Your creditors are prohibited from contacting you once you file, and the court can stop pending lawsuits, IRS seizures, foreclosures, repossessions, and evictions (as long as a state court has not yet entered a judgment or an eviction).

Of course, the ultimate benefit from filing Chapter 7 is that your debts can be completely wiped away. This kind of bankruptcy is called liquidation because you're supposed to liquidate your assets in order to help pay off as much of your debt as possible. However, most people filing chapter 7 bankruptcy don't have many assets to speak of anyway, and their homes are usually protected by their state's homestead exemption laws.

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You can receive a free case review from a Bankruptcy Attorney at our website. To learn more about the benefits of bankruptcy visit us at http://freebankruptcyevaluation.org

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