There is much to consider before choosing to file bankruptcy. Many people worry about the effect bankruptcy will have on them and for how long. For most the first question that people ask when filing bankruptcy is: How bad will it affect my/our credit score?
As a Houston bankruptcy attorney, most of my clients already have damaged credit scores. They would not be seeking relief through bankruptcy unless they were already in trouble financially. I always make certain that my clients know that there are consequences with filing any bankruptcy. While many people readily realize and accept there are consequences to bankruptcy, many people do not realize there are also benefits to filing a Chapter 7 or Chapter 13 bankruptcy.
Bankruptcy clients also ask what the benefits are to filing for bankruptcy. As a service to them, I have laid out the following five benefits to filing a personal bankruptcy. You may be wondering about the word benefit, but think about this: It is called bankruptcy protection because that is what it is. Here are the Five Bankruptcy Benefits:
1. Peace of Mind – Yes, I mean it!
As soon as the bankruptcy is filed, you stop all harassing phone calls and mail/email from creditors and collection agencies. Anyone who has gone through this knows the emotional plunge that comes with a phone ringing when you owe money you cannot afford to pay or the dread in going to the mailbox. There is true peace of mind in knowing you can answer the phone or go to the mailbox without a sense of dread.
2. Creditor Lawsuits Stop
If lawsuits have been filed by creditors, just like with collection calls, they are stopped as well. A creditor is mandated to abide by certain federal rules once someone files a bankruptcy. The court will not allow the lawsuit to go forward due to the bankruptcy laws.
3. You Do Not Have to Give Up Everything
Many people are afraid to seek bankruptcy protection because they are afraid they will have to give up their home or car(s). In fact, so long as you agree to make the payments and do so, you may keep certain assets. You can even keep a credit card so long as you are making the payments and agree to continue! While there are some debts you cannot relieve with bankruptcy (child support, alimony, etc.), there are also debts and possessions you do not have to give up.
4. Cash to Spend on More Important Needs
The biggest benefit in personal bankruptcy comes from the cash you are able to free up and use for more pressing needs such as mortgage payments or rent, groceries and health insurance coverage. Instead of paying the minimum payments on your debt each month only to see the principal reduced by just a few dollars, you can put your dollars towards the things you and your family really need.
The median family currently spends about $2,000 a month in to pay toward debts not including their mortgages. Many consumers can help themselves by filing for Chapter 7 bankruptcy relief instead of spending more days, months, and years living on the edge by paying off the minimum amounts on debts like credit cards and payday loans. By filing for bankruptcy, they get to keep cash that can pay for things they need instead of giving it to companies who have no interest in their or their families well being.
5. A Fresh Financial Start
By getting the pressure off, a family can begin to rebuild their credit and their lives. Yes, it will take a little time, but if you choose to learn from the “Bad Debt Experience,” you can get there by taking small steps and making different financial choices. No, not all bankruptcy is the result of reckless spending (though credit card companies like to tell that to the world); many people fall into trouble when the economy changes and they lose a job and are forced to take something paying much less or when a loved one becomes ill or injured and time is lost to taking care of them while medical expense rises. But, even if it was all due to bad choices you can rebuild your life and your credit.
With the extra money you will save from paying the minimums on cards and other debt, you can take care of essential needs and begin to save for a rainy day.
So, starting over fresh and using current income to meet current needs could be just the jump-start you and your family needs. If you need assistance, contact a bankruptcy attorney to insure you understand how to file and what is involved.
Michael Holland is a bankruptcy attorney in Houston, TX who is passionate about people. He is a Big Brother through Big Brothers and Big Sisters in Houston and is married to a wonderful wife, Christine. They have two highly pampered Golden Retrievers. He can be reached through his website: Houston-Bankruptcy-Attorney.info. This article is in no way intended to convey legal advice and in no way constitutes an attorney client relationship. Seek legal assistance when considering filing for bankruptcy.
