When you face overwhelming debt, it may seem like there is no way out. However, filing for bankruptcy can be a viable solution to regain financial stability. Although the decision to file for bankruptcy is significant and you should never take it lightly, it can offer a fresh start and a path to a more secure financial future. As reported by Statista, over 31,000 California residents filed for bankruptcy in 2022.
It is important to understand how this process can positively impact your life, helping you to move past financial hardships.
Stop creditor harassment
Once you file for bankruptcy, an “automatic stay” goes into effect. This court order stops most creditors from contacting you, giving you relief from harassing phone calls and letters. Creditors must halt all collection efforts, including lawsuits and wage garnishments. This immediate relief can reduce stress and give you peace of mind as you work towards resolving your financial issues.
Discharge unmanageable debts
In many cases, bankruptcy allows you to discharge certain debts completely. This means you are no longer legally obligated to pay them. For instance, Chapter 7 bankruptcy can eliminate most unsecured debts like credit card debts and medical bills. Getting rid of these debts can significantly reduce your financial burden and allow you to focus on rebuilding your financial health.
If you file for Chapter 13 bankruptcy, you can reorganize your debts into a manageable repayment plan. This type of bankruptcy allows you to keep your property while you make payments according to a court-approved plan, usually over three to five years. It can be a viable option if you have a regular income and seek to catch up on missed mortgage payments or car loans.
Improve financial stability
Bankruptcy can set the stage for improved financial stability. Once you discharge or reorganize your debts, you can start rebuilding your credit. By adopting better financial habits and making timely payments, you can gradually improve your credit score. This new beginning can open doors to better credit opportunities and a more secure financial future.
While filing for bankruptcy is a major decision, it can provide significant relief and a path to a better financial life. If you find yourself overwhelmed by debt, consider how bankruptcy might be a tool to help you regain control and start anew.