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What Happens When You File Bankruptcy?

The word “bankruptcy” can scare people, bankruptcy can be the smart option for people struggling financially. A financially sound future is what we all want and sometimes we need to take control of mounting debt and constant harassing collection efforts. You may feel overwhelmed, we can help.

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    What Is Bankruptcy?

    Bankruptcy is a legal tool to help consumers resolve overwhelming debt. Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. It is your legal tool.

    The bankruptcy process begins with a petition filed in U.S. Bankruptcy Courts to release you from debt. In most cases, your request will be granted. A bankruptcy filing stops debt collection calls, debt lawsuits and wage garnishments. It gives a person a second chance and let you start your financial life with a clean slate.

    The good news is, nearly everyone who files for bankruptcy gets that second chance.

    When Should I Declare Bankruptcy?

    When asking yourself “Should I file for bankruptcy?” think hard about whether you could realistically pay off your debts in less than five years. If the answer is no, it might be time to declare bankruptcy.

    The thinking behind this is that the bankruptcy code was set up to give people a second chance, not to punish them forever. If some combination of bad luck and bad choices has devastated you financially, and you don’t see that changing in the next five years, bankruptcy is your way out.

    Even if you don’t qualify for bankruptcy, there is still hope for debt relief. Possible alternatives include a debt management program, a debt consolidation loan or debt settlement. Each one of those choices typically require 3-5 years to reach a resolution, and none of them guarantees all your debts will be settled when you finish.

    Remember that bankruptcy carries significant long-term penalties. It is stuck on your credit report for 7-10 years, which can make getting loans in the future very difficult.

    The flip side of that is there is a great mental and emotional lift when all your debts are eliminated, and you’re given a fresh start.

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    Why Declare Bankruptcy?

    The obvious answer for why you should declare bankruptcy is that you are drowning financially and no one – not banks, not online lenders, not family or friends – will throw you a lifeline.

    The millions of people who lost their jobs or businesses because of the coronavirus, have some hope because of bankruptcy. They still had bills to pay, and in many cases, no way to handle them. That’s what bankruptcy was meant to address. It’s not a bailout. It was created to give people a chance to get back on their feet financially and restore their peace of mind.

    If your bills have grown to levels your income simply can’t handle, having your debts discharged through bankruptcy is a safe, legal and practical choice.