[dropcap]T[/dropcap]hough there are numerous myths and misconceptions about bankruptcy, it is indeed a fact that filing for insolvency does lead to a few factual consequences that you simply cannot undermine. Some of the bankruptcy consequences have positive implications while there are some that leave a negative impact.
Just like all other legal procedures, there are diverse factors to keep in mind before you opt for filing a bankruptcy. Bankruptcy is certainly a unique legal concept and even some non-bankruptcy lawyers could get pretty confused regarding its consequences.
There is a tremendous amount of social stigma attached to insolvency that time and again hampers your judgment and you often find it difficult to accept bankruptcy even if it is the last resort.
The fact remains that bankruptcy does end up damaging your self-esteem and credit profile, but remember it could be the only option left to you to get out of the strangling debts you are currently burdened with. If you do not opt for it, your finances could hit rock bottom. Your life would be falling apart.
Fortunately, there are certainly some positive consequences of bankruptcy and you should consider focusing on them, given your current financial distress. Here are some of the consequences that every debtor must be aware of before opting for insolvency as a debt relief option.
Stops Wage Garnishment
Wage garnishment puts a whole lot of pressure on your shoulders as there is absolutely no way you could avoid the monthly payments. According to the court’s decision, your creditor would be entitled to a part of your income every month until you have paid back the full amount. As you are obviously under tremendous financial distress and finding it difficult to make ends meet, it is quite natural that wage garnishment would make your current financial issues even worse. On the contrary, if you are filing for Chapter 7 bankruptcy, you could permanently put a stop to wage garnishment.
Prevents Car Repo
If your workplace is far away from where you live, especially, if you are not that young and energetic anymore, you definitely bank on your car to travel to and fro. Without your car, it is quite likely that your work efficiency and performance would be adversely impacted that could lead to job loss. If you file for bankruptcy, it would prevent your vehicle from getting repossessed.
Helps to Delay Your Home’s Foreclosure
If you are going for a foreclosure of your house, filing for bankruptcy could be effective in stalling the foreclosure process. This would automatically allow you some more time for catching up with your mortgage payments. Sometimes, if creditors realize that your property is not as valuable as they thought and if they think that it could only cost them more for selling the property, they could just abandon it. You could then be allowed to keep it. Browse through Carson law firm website for more detailed information on bankruptcy solutions.
Automatic Stay on Most Collections
As soon as you file for bankruptcy Chapter 7, an automatic stay comes into immediate effect. The automatic stay is able to stop most of your creditors from attempting to collect the debt amount from you. Moreover, during this period the creditors cannot take any legal recourse like garnishing of wages etc. Your creditors are barred from taking control over your bank account, cutting off your utilities and taking your property.
Some Negative Consequences
Bankruptcy does have a few consequences that impact you negatively.
Credit Rating
If you have filed bankruptcy, your credit rating would surely be impacted and the insolvency entry would be very much present in your credit profile for many more years.
Future Credit
Bankruptcy could adversely affect your capability to get future credit. If you are applying for a credit exceeding a set amount, it is necessary for you to keep the credit provider well-informed about your bankruptcy. Remember that credit reporting agencies would keep track of your financial insolvency details for 5 years since you became bankrupt or 2 years since when the liquidation is supposed to end, whichever is supposed to be later.
The Case in Favor of Bankruptcy
Bankruptcy gives you a fresh lease of life financially. Bankruptcy, despite some of its negative consequences on your credit, should be considered because it would certainly give you an opportunity to rebuild your financial life. When all other debt relief options are exhausted and when it is just not possible for your current income to cope with the ever-mounting debt, it could only be logical to file for bankruptcy.
Conclusion
After weighing the positive and negative consequences, you must determine what works best for you. Some of you could be skeptical about insolvency and it could be difficult for you to even imagine how to tackle such a situation. It could leave you depressed and terrified but soon you would realize that bankruptcy is not necessarily evil and it does have a really brighter side. You must acknowledge that privation is certainly not the end; it surely is the beginning of a better phase in your life as it teaches you important lessons about handling your finances.
Jason Hartman is a financial advisor at a private firm. He is an expert on debt management, bankruptcy, and other issues ranging from loans to settlement. He runs a blog for sharing articles to help his viewers understand where they stand in their cases. He recommends excellent resources like Carson law firm website.
