Despite its many benefits, bankruptcy still carries a strong, negative cultural connotation. Many people view bankruptcy as a sign of failure or possibly of weak moral character when neither belief is necessarily true.
Responsible, hardworking individuals can wind up facing bankruptcy because of situations beyond their control, like getting into a car crash caused by a driver without insurance or an unexpected lay-off from work. Whether your costs skyrocketed or your income dropped, when you find yourself living on credit, it is often only a matter of time before your debt gets out of control.
Filing for personal bankruptcy can be a solution for the stress you experience whenever you hear the phone ring and a way for you to take control of your finances again.
Bankruptcy stops creditors from continuing to bother you
Collection companies know that they can only call you so many times and during certain times of day, but even if they comply with all of the rules, their frequent attempts to contact you can feel like harassment.
Beyond the fear you may feel every time the phone rings, there’s also the potential of one or more of these companies taking more aggressive collection efforts against you, such as seeking a garnishment of your wages. When you file for bankruptcy, the automatic stay ends all collection activity, allowing you some time to decompress after weeks or months of non-stop creditor calls.
Bankruptcy replaces multiple delinquent accounts with one bad mark
People often worry about how bankruptcy will affect their credit. It is true that bankruptcy pulls your score down and remains on your credit report for years. However, the same is true of each of those late payments you’ve made to your mortgage company and your credit card.
Delinquent payments, high balances and other negative marks from your existing creditors each add up on their own to drag down your score and make you look like a risk to future lenders. While bankruptcy on your report may not be ideal, it is certainly better than 20 or so different delinquent accounts, collection accounts and judgments against you.
Bankruptcy frees you up for the future
Perhaps the most important thing that bankruptcy does is provide you with a discharge of your unsecured debt. Your credit card debts, medical debts and certain other existing debt may be part of that discharge, meaning you won’t ever have to repay them.
All of the money that was once going for your outstanding medical balance or minimum payments on your credit card will be part of your broader budget. This will allow you to put money in savings and take control of your financial life.