Filing for bankruptcy is not a decision that should be taken lightly. It can have lasting consequences, such as putting a dent in your credit rating. Nonetheless, bankruptcy is far from all doom and gloom, and several benefits are often ignored.
When considering bankruptcy, it’s important to take a balanced approach. This means looking at the positive aspects, too. Outlined below are some important points to consider:
Bankruptcy can prevent foreclosure
Dealing with any kind of debt can be stressful, but some debts, like mortgage debts, have the potential to put your home at risk. Lenders can initiate foreclosure proceedings, which aim to take possession of your property and recover the outstanding balance.
Bankruptcy can stop this, at least temporarily. Foreclosure proceedings generally have to stop until the bankruptcy case has been heard. This can allow you the time you need to put a plan in place so that you can keep your home.
Stopping aggressive debt collection
When you are trying to sort your finances out, aggressive debt collection practices can throw you off. You may be threatened with legal action, face visits from debt collectors and may even be told that your wages will be garnished. All of this can feel very overwhelming.
When you file for bankruptcy, debt collectors typically have to stop pursuing you. Again, this may be temporary, but it at least allows you to come up with a plan, write off eligible debts and implement payment plans for those that cannot be written off.
There are benefits and drawbacks to bankruptcy, and all of these should be considered carefully. As you try to get your finances on track, it can help to have legal guidance regarding your options.