The Many Benefits of Bankruptcy


If you are having a hard time with money right now, you can take comfort in the fact that you are not alone. Millions of American families are struggling with debt at this very moment. Many of the people are contending with unemployment, underemployment and underwater mortgages for the first time in their lives, and never had such troubles before now.

With the current state of the American economy, millions of Americans are finding much needed relief through bankruptcy. The government is fully aware of the national unemployment rate and the depressed real estate market. Fortunately, people are completely within their legal rights to seek out bankruptcy relief and the federal government lends their support. If filing for bankruptcy can make a bad situation better for you, by all means you should go for it.

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For individuals there are two main types of bankruptcy options, which are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 bankruptcies are most common for people who are unemployed, underemployed or have a median income below the median income for their state. In a Chapter 7 bankruptcy, unsecured debt such as medical bills, credit card debt and personal loans are dischargeable.

Chapter 13 bankruptcy is used by people with a regular and steady source of income. Individuals whose income is too high to qualify for a Chapter 7 are diverted to filing a Chapter 13 (debt reorganization bankruptcy) instead; therefore, the people with a high paying job are typically the ones that wind up filing a Chapter 13 bankruptcy.

In a Chapter 13 bankruptcy, the debtor pays off all or a portion of their debts over a period of 3 to 5 years at a rate they can afford. Each individual case is different; your repayment plan will depend on your monthly income, your monthly bills and how much disposable income you have after meeting your monthly obligations.

In order to determine which bankruptcy you qualify for, you will have to take the bankruptcy "means test." This test compares your monthly income, for a household of your size to the median income for your state. If your income falls below the median income for your state then you automatically qualify for a Chapter 7 bankruptcy. If your income is above the median income, your bankruptcy attorney will calculate allowable deductions. If your income is still too high, then you will have to file a Chapter 13 bankruptcy.

Once you file either bankruptcy, the first thing you will notice is the relief you get from the "automatic stay, "which prohibits creditors from all debt collection activity. You can enjoy peace of mind knowing that the phone will stop ringing and those unpleasant letters will stop coming in the mail.

If creditors have obtained any judgments against you and your paycheck has been subject to wage garnishments, the automatic stay will remove any wage garnishment from your paycheck and you will start to receive your whole paycheck. Working with the right legal team, may give you the opportunity to get reimbursed for the wages that were already garnished, but you have to act fast.

In a Chapter 7 (debt liquidation bankruptcy), the process is completed in approximately 4 to 5 short months from start to finish. Once you receive your discharge, your unsecured debt such as unpaid utility bills, medical bills, credit card debt, personal loans and certain taxes (more than 3 years old) are wiped out. You can breathe easy knowing that you have been given a fresh start, free from unsecured debt.

You can now focus on rebuilding your credit which can be easier than you might have thought. By following your lawyer's advice, following a sound budget and living within your means, you can start rebuilding your credit score. With hard work, dedication and discipline, you can be on your way to a good credit standing within just a few years from your discharge. Sounds too good to be true, it's not. The immediate and long-term benefits of filing bankruptcy can be immeasurable, so do yourself a favor by contacting an experienced bankruptcy attorney today!


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