Why File for Bankruptcy?
Bankruptcy is a legal way to discharge debts. Bankruptcy has biblical precedent. Look at the "Jubilee Year" and the forgiveness of debt found in the bible in Deut. Chapter 15 and other places. In lieu of a jubilee, U.S. law as mandated in the Constitution provides for bankruptcy relief from creditors. When a person receives a bankruptcy discharge, they are forever relieved from liability for most debts incurred before the bankruptcy was filed. The purpose of bankruptcy is to give you a "fresh start" and the bankruptcy code is interpreted by the courts to give effect to these words.
The purpose of bankruptcy is to give you a "fresh start" and the bankruptcy code is interpreted by the courts to give effect to these words.
In most cases, once you file your case, the “Automatic Stay” immediately goes into effect. The automatic stay means that a bankruptcy filing automatically stops, or stays, and brings to a halt most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection harassment. Generally, creditors cannot take any further action against you or your property without permission from the Bankruptcy Court.
Should you file under Chapter 7 or Chapter 13?
Bankruptcy and Credit Recovery
Most of our clients are able to rebuild their credit scores to over 600 one year after their bankruptcy discharge and to over 700 two years after their bankruptcy discharge. Filing bankruptcy eliminates continued repayment of burdensome unsecured debt freeing up money for down payments on secured debts such as homes or cars which help to rebuild credit. People who try to pay off their debts instead of filing bankruptcy may often suffer from worse credit scores long-term due to delinquencies, collection activity, judgments, and the large amount of their outstanding debts.
Resources:
Disputing Errors on Credit Reports
Essentials About Credit Reporting
Why Not Filing for Bankruptcy Can Slow Your Credit Recovery
Bankruptcy and Student Loans
Student Loans are regrettably non-dischargeable in bankruptcy except in cases of undue hardship. Even in cases of undue hardship, it is very expensive to litigate and pursue an adversary proceeding to discharge student loans due to creditor opposition. As a result, choosing from the various income driven repayment plans that are available is usually the best course of action. For further information, please consult the following resources.
Resources:
Student Loan Repayment Rights
Student Loan Borrow Assistance
Repayment Plans
Income-based Repayment
Closed Schools
