Did you know that in 450 BC, Roman law gave creditors the right to either kill or enslave their debtors? Today, however, bankruptcy is a way for borrowers to get out of debt. Although bankruptcy can sometimes harm your credit score, it is an effective way to partially or completely eliminate your debt. But why file for bankruptcy? There are many benefits of filing for bankruptcy, as it is a viable solution to get out of debt.
1. Bankruptcy eliminates your debt. This is one of the top reasons people file for bankruptcy. Depending on which chapter you file for, the bankruptcy will either partially or fully wipe away your debt. Chapter 7 bankruptcy, for example, will liquidate your assets for complete financial relief, while filing Chapter 13 bankruptcy, which 16% of Michigan bankruptcy filings consisted of in 2011, will restructure your debt so that you end up paying back less than what you owe.
2. Bankruptcy protects your property. With the exception of Chapter 7 bankruptcy, your property is not legally allowed to be taken away from you. This property can include your house, car, and other valuable assets. While each state offers a different level of property protection, they all prevent unsecured creditors from seizing your property.
3. Bankruptcy offers an automatic stay. When an automatic stay is in place, creditors must halt all collection action. A court order prohibits creditors from attempting any form of collection, including wage garnishment and foreclosure. If creditors violate the stay, however, they risk contempt of court and money damages.
Unfortunately, no one is immune to financial problems. In fact, over 25% of all bankruptcy filings are done by people who hold at least a four-year college degree. But why file for bankruptcy? Filing for bankruptcy eliminates your debt, protects your property, and offers an automatic stay. As a result, you can more efficiently get out of debt.