When it comes to bankruptcy, most people think of it (and describe it) as a terrible burden with almost no benefits. And, to be fair, bankruptcy certainly does impact the individual filing for bankruptcy. However, there are some very real, and very helpful, benefits that come with filing for bankruptcy, and they can give people the boost they need to sort out their financial life and get back on track.
First of all, a bankruptcy can open up the debt discharge process, which means that an individual could see some, most, or even all of their debt eliminated. How much of your debt is eliminated largely depends on what type of debt it is – but it is possible to wave goodbye to a significant chunk of your debt thanks to bankruptcy.
Another benefit of filing for bankruptcy is that it stops creditors from calling you and harassing you. This is a huge weight off the shoulders of many people, and it frees them up to worry about other more important factors in their lives.
Bankruptcy can also delay or stop a foreclosure. When you file for bankruptcy, a judge issues an “Order for Relief,” which means that creditors have to stop attempting to collect money from you. In the case of mortgage payments and your home, this means you get an “automatic stay” and it will postpone your foreclosure until your bankruptcy is resolved.
There are many other ways that a bankruptcy can help those who are in debt, so consult with an experienced tax attorney if you have questions about the bankruptcy process.
Source: FindLaw, “Benefits of Bankruptcy,” Accessed Sept. 9, 2015