When the burden of debt becomes too great to bear, bankruptcy may offer relief. However, many people resist this path because of the significant stigma surrounding it.
A common misconception is that bankruptcy is a way for financially irresponsible people to get out of their debts. The reality of bankruptcy is much more complex.
Bankruptcy can protect your family
Financial struggles are even more stressful when you have people depending on you. You might worry about losing your home, or you may experience tension in your marriage due to constant calls from creditors.
When you file for bankruptcy, an automatic stay takes effect right away. This can provide immediate relief from creditor harassment and prevent your mortgage lender from initiating foreclosure on your home.
Bankruptcy can help you pay debts
Filing for bankruptcy does not mean the erasure of all your debts. If you have an income source, Chapter 13, also called the wage earner’s plan, can help you develop a plan to pay off all or part of your debt.
Chapter 13 bankruptcy requires you to dedicate your disposable income to paying your debts. You must pay some debts in full, like your mortgage, but other debts may be eligible for full or partial forgiveness.
Bankruptcy offers hope for financial recovery
Bankruptcy can help you recover your financial stability and rebuild your credit. The bankruptcy remains on your credit report for up to 10 years, but you can still work to recover your credit score during that time. In the long term, filing for bankruptcy may have less impact on your credit score than remaining in severe debt.
Filing for bankruptcy is a difficult decision to make. If you are struggling with debt, bankruptcy may offer a path to financial health.
