Advantages of Bankruptcy
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The decision to file bankruptcy is a tough one. That is why it’s important to understand the pros and cons of bankruptcy, so you can make an informed decision about whether filing a bankruptcy petition is right for you.
The main goal of bankruptcy is to obtain a total discharge (i.e., forgiven and not to be repaid) of your debts and get a fresh financial start. However, bankruptcy is also used to end creditor harassment, save your home, and help you to take control of your life.
Here are just a few advantages of bankruptcy:
- Protects property and income from unsecured creditors. Once bankruptcy is filed, an unsecured creditor such as a credit card company is stopped from claiming a lien on your property.
- Stops wage garnishment. It may be possible for some of your garnished wages to be returned.
- Stops creditors from harassing, contacting, threatening, or suing you through the automatic stay. Once your bankruptcy petition is filed, the automatic stay immediately prevents creditors from enforcing a lien on your property.
- Helps you keep or regain your driver’s license subject to revocation because of an unpaid accident judgment, which may mean employment and income for your family.
- Keeps on or turns back on your utility service.
- Allows you to keep many of your assets.
- May erase junior liens or second mortgages.
Disadvantages of Filing for Bankruptcy
There are some disadvantages to filing for bankruptcy including:
- Stays on your credit history for seven to ten years. However, be honest with yourself. How poor is your credit right now, and how long will it realistically take you to pay off your debts and clean up your credit?
- Loss of credit cards.
- Loss of some non-essential property that is not exempt. For most people this is not an issue. Your bankruptcy lawyer will help you maximize the Massachusetts or federal exemptions to help you keep your property.
Bankruptcy doesn’t work on the following types of debt:
- Student loans.
- Child and spousal support obligations.
- Court-ordered fines and penalties.
- Restitution to crime or personal injury victims.
- Tax debts with some exceptions.
- Consumer debts for luxury items purchased within 40 days of filing the bankruptcy petition.
- Cash advances obtained within 20 days of filing the bankruptcy petition.