There are many benefits of filing bankruptcy, however there are many other factors that you should consider as well before filing for bankruptcy, some of which may be a detriment to filing for bankruptcy. With that said there are a lot of myths out there regarding filing for bankruptcy and In my opinion as a Seattle bankruptcy attorney, the benefits significantly outweigh the detriments to those considering filing bankruptcy for most people who don’t own significant assets. This article entitled the benefits of filing bankruptcy discusses some of the benefits. If you are considering filing chapter 7 or chapter 13 bankruptcy, you should speak to a bankruptcy lawyer to best asses your situation and see if bankruptcy makes sense for you situation.
Some of the benefits of filing bankruptcy include discharging a significant amount of unsecured debt such as credit cards, medical debt, personal loans or payday loans among other things. Chapter 7 bankruptcy allows debtors to receive a fresh start without having debt hanging over your head forever. For those who don’t qualify for a chapter 7 bankruptcy due to income or the inability to protect an asset because it has more value than you can exempt, they may want to consider filing for chapter 13 bankruptcy. A chapter 13 bankruptcy allows those who don’t qualify for a chapter 7 bankruptcy due to a high income or a wish to protect certain assets to go on a re payment plan in which debtors will pay a percentage of their unsecured debts back to creditors. The amount paid back will be determined by your family size, income, assets, and other payment obligations. A chapter 13 bankruptcy may also be utilized to make up payments on your home if you have fallen behind and are facing a foreclosure sale. A chapter 13 bankruptcy may be filed at any time prior to a foreclosure sale and it will stop the foreclosure sale immediately in most cases allowing you to make up your payments you are behind over a 60 month period. Additionally if you are facing a wage garnishment, a bankruptcy filing will stop the wage garnishment immediately due to the automatic stay, which stays any debt collections from the moment your bankruptcy case is filed. The attorney or debt collector who is garnishing your wages will be notified and if any funds were garnished within 90 days of when your bankruptcy case was filed, you may be able to get these funds back with the assistance of your bankruptcy attorney.
While the benefits of debt elimination are the biggest benefit to filing for bankruptcy, there are some detriments which include having a bankruptcy filing report on your credit report and stay there for up to 10 years. With that said most people filing for bankruptcy do not have good credit in the first place so the impact will be minimal, and in fact most people who file for bankruptcy see their credit scores increase if they already did not have good credit due to the fact that most debt is eliminated so you can start fresh. Another detriment is that those who file for bankruptcy may have to wait 2 years to qualify for a home loan after filing chapter 7 bankruptcy, but in chapter 13 you can qualify for a home loan immediately after you complete your plan unless you otherwise get court approval to incur new debt. For those who need to file a chapter 13 bankruptcy, it is prohibited to incur new debt without court approval and all disposable income must be committed to a bankruptcy repayment plan. This can be restrictive for some debtors, but at the end of the day, a chapter 13 bankruptcy case is voluntary and the case can be dismissed at anytime by filing a motion to the court.
For most debtors, the cost to be debt free and live on a budget is better than paying minimum payments for the next 3-5 years only to be stuck in the same position as they were before. At least in the chapter 13 case, a debtor will be debt free in 3-5 years after the chapter 13 bankruptcy case is filed. Finally debtors considering chapter 7 bankruptcy, must understand that a chapter 7 bankruptcy case is a liquidation case and if a debtor has any assets above allowed exemption amounts, they may be at risk of losing that asset so you need to be sure to discuss any assets you may own with your bankruptcy attorney prior to filing.
One myth that people have about filing for bankruptcy is that they will never qualify for credit, renting an apartment or a vehicle in the future and that is simply not true. The truth is that when a debtor files for bankruptcy they will be mailed several offers for new credit cards and car loans, albeit at higher interest rates than they may have enjoyed in the past. Your can always repair your credit, your credit post bankruptcy and some tactics are to obtain new secured credit cards or get added as an authorized user to a friend or family members card and then have their credit start reporting on your credit report. Being added as an authorized user has no affect on your friend or family members credit and they don’t even have to give you access to the credit card.
If you have additional questions regarding the benefits of filing for bankruptcy please contact Symmes Law Group by completing the contact form or giving us a call at 206-682-7975