1. Eliminating the legal obligation to pay many of your debts
In some cases, declaring bankruptcy can help you eliminate your obligation to pay certain debts. Of course this will depend on the situation. The most notable debts that you can eliminate through bankruptcy are credit cards, medical bills, most personal loans and student loans.
The process of wiping the slate clean, sometimes referred to as a discharge of debts, is fairly simple. The purpose of a discharge is to reduce debt and give you a fresh start. Most, if not all, of your debts can be discharged through Chapter 7 bankruptcy or Chapter 13 bankruptcy.
2. Stop foreclosure on your house allowing you to make payments to catch up on missed payments of your mortgage
If you are facing foreclosure, Chapter 13 bankruptcy can stop the process at any time before the sale. Bankruptcy does not mean you can stop paying your mortgage and keep your home. The mortgage arrears of a household are calculated as the difference between the amount that the current value of the house is and the amount that is the mortgage. If a person is unable to pay the mortgage, then the bank can seize the assets and use the money to pay off the debt.
3. Prevent your car or other property from being repossessed
If you file bankruptcy quickly after a creditor has repossessed your car, you may be able to force them to return your car or other personal property.
Even if the creditor has repossessed your car, filing bankruptcy can effectively force them to return your car or other personal property (if the bankruptcy is filed quickly enough). The past payments you have missed will be consolidated into your Chapter 13 Bankruptcy plan. After this you will no longer pay the finance company, rather you will make monthly payments to the trustee of your Chapter 13 Bankruptcy who will then pay the finance company.
4. Reduce or even eliminate high medical bills
Sometimes an unfortunate accident or major recently discovered illness can completely ruin a family. Many families have to make choices on allocation of bills. Often, bills that were once important become insignificant to the large medical bills acquired by a loved one. Filing Chapter 7 Bankruptcy can greatly reduce the amount of medical bills.
5. Recent loss of employment: Research shows losing work is one of the most frequent causes of people declaring bankruptcy.
Studies show that loss of work is one of the most common reasons people file for bankruptcy. This is very easy to see. A family can get comfortable on two maybe even one salary. They can take on regular amount of debts, join clubs, and pay normal bills with relative ease. All of a sudden one or both spouses lose a job and a family must go from two salaries to one. Losing a job is closely tied to high medical bills. Losing a job means this family may be left without the protection of insurance that was once provided by their employer. Often times these two factors combined create an almost impossible mountain to climb without the help of bankruptcy.
6. Stop harassing behavior from creditors.
Some creditors do not always take the right course of action when attempting to collect a debt. Often, creditors will persistently call the home of a particular debtor with demeaning and abusive behavior. Not only is this unethical it can rise to the level of unlawful. In essence, bankruptcy will put on hold the demands of many creditors and stop the harassing phone calls and other inappropriate behavior all together.
7. Restore or prevent your utilities from being shut off.
As you have probably seen many of these reasons overlap. Some lead to another. If your home is in risk of foreclosure then your utility bill may also be in risk of being terminated. Filing bankruptcy can prevent the utility company from leaving you in the dark.
8. Provide help for large amounts of student loan debt.
While it is true that your student loans will not be eliminated like several other types of unsecured debt, bankruptcy can consolidate your student loan debt. This consolidation will allow a debtor to make monthly payments through Chapter 13 Bankruptcy that are within the financial ability of the debtor.
9. End wage garnishments.
Chapter 7 Bankruptcy will stop wage garnishment. Wage garnishment basically takes away your weekly earnings often times leaving you without necessities. Chapter 7 Bankruptcy allows you to purchase necessities for you and your family. Chapter 13 Bankruptcy will also help in this regard.
10. Challenge certain claims of fraudulent creditors.
Bankruptcy will allow you to challenge these claims from creditors who are trying to collect more money from you than you really owe. An attorney can provide the support and the backing you will need to step up to these creditors. Attorneys often even the playing field between a big creditor and a single debtor. Filing bankruptcy with an attorney can stop fraudulent reporting by a creditor.