Have you considered filing bankruptcy? If you can’t make ends meet, if you lost a job, if you got divorced, if you made a medical issue, and are constantly being harassed by creditors, then you see the writing on the wall and are most likely considering filing bankruptcy anyway. But how will bankruptcy help you? More importantly, how will bankruptcy help you in the long run? How will bankruptcy affect your credit and how will that affect your life? All these are the issues I will address in this publication. What it all comes down to is a “fresh start”! A fresh start may mean different things to different people, but when it all comes down to it, filing for bankruptcy lets you put the past behind you and move forward, unburdened by the debt that has been holding you back (in some cases for years).
The “Automatic Stay”, what it is and how it can help you. This is the first benefit you get in bankruptcy; the “automatic stay” basically stops all pending litigation brought against you by lenders, to collect a debt or to obtain possession of collateral that secures one or more of your debts. Let’s say you’re facing foreclosure and you have a pending foreclosure sale date coming up, as long as you electronically filed your bankruptcy prior to the sale occurring, the automatic stay will prevent your foreclosure sale (at least for a time). It also works the same way if you’re getting evicted from an apartment you rent or if a car you have a loan on, is being repossessed. It has the same benefit if you have a lawsuit against you from an unsecured creditor, such as a credit card company or a medical billing company, the automatic stay will freeze any proceedings in court from moving forward and if court has already ordered your wages garnished, and the automatic stay will stop that also. The “Automatic Stay” is basically your first line of defense in getting your life back, and to stop the bleeding; the automatic stay of bankruptcy will do just that for you, will put an end to the harassing phone calls and any legal actions that are being taken against you. For some, this is the biggest and most important benefit of filing bankruptcy, to make it all finally stop.
The psychology of bankruptcy is a little perplexing to most people, until you’ve actually gone through the process. Most people feel very anxious about the prospect of having to file bankruptcy and how it will affect their lives. But the one thing I’ve learned is a psychological benefit of filing bankruptcy, greatly outweighs the imagined backlash you will actually have to bare later. Some may say “but, can’t it hurt my credit score and I take me so long to get back on track?” The simple fact is, if you’re looking at bankruptcy, you’ve already hurt your credit history report and have delinquent (unpaid) payments, most likely which are reported as negative statements on your credit history report. Some of you may have gone through a foreclosure, signed a Deed-in-Lieu, or possibly entered into a mortgage modification, all of these have can hurt your credit history report. Yes, filing for bankruptcy will stay on your credit history for 7 to 10 years (10 years for a chapter 7 bankruptcy and seven years for chapter 13 bankruptcies). But all of this, pales in comparison to the psychological benefit you will reap by simply not being scared to answer your phone. If you’re considering bankruptcy, then the sound of your phone ringing probably sends shocks of terror up your spine. When that phone rings and it’s not someone you know because their phone number didn’t come up or its listed as “Restricted”, you know what I’m talking about, you know the anxiety I mean. In reaping of this psychological benefit, only increases once you receive your discharge and start moving on with your life, putting the pieces back together, but now you’re doing it without having to look over your shoulder. People do not realize how much negative thoughts and depression can hold you back from actually achieving everything that you could and should in life. Bankruptcy will allow you to get rid of those feelings of anxiety; without taking a pill. Once you can get up in the morning and look forward to the day ahead of you, instead of loathing what your life has become; there are no words to describe the psychological benefit you will be afforded by this.
One obvious benefit to bankruptcy is of course the discharge of your debts. Let’s just talk simple math for a moment and discuss the length of time needed to pay back your debts, while surviving and how that impacts your life, credit score and wrapping them all together. Some people may want to try to settle their debts, or attempt to pay them back over time. But the simple mathematics of interest and the reality of our lives make this an almost impossible task. Let’s take a simple bill of $10,000 on a credit card, with you making monthly payments of $200 per month, at an interest rate of 18.99%; it would take you 8 and a half (8.5) years to pay off this debt and you would pay over $10,000 just in interest alone, before you paid it off (effectively doubling your bill). This one bill, in less than 10 years would double, and you would be struggling the entire time it’s being paid off. This is just the example of one bill, now add all the other bills in your life and try to make all those payments and you’ll know what we’re discussing here. Bankruptcy allows you to keep thousands of dollars that would have been wasted on paying interest on the debt(s) you could of discharged in bankruptcy. That money can be used to purchase a home, purchase a car, pay bills and even start a college tuition fund for your children. Think of all the things you would be able to do in the future, if it wasn’t wasted on paying interest on bills you could’ve discharged in bankruptcy. You only have a certain amount of time in your life to accomplish what you want, are you going to spend it paying off bills that you could’ve discharged in bankruptcy, giving yourself a fresh start or are you going to attempt to keep living in the same rat race you’ve been living in all this time?
The biggest benefit of bankruptcy must be your credit history report. Most people cannot understand this portion, as the first thing you think of is, that bankruptcy is going to damage my credit report. Yes this is true, bankruptcy will be reported on your credit history report for a number of years, but the benefit greatly outweigh the negatives. At this point most people get confused, “how can you help my credit if bankruptcy is going to destroy my credit?” For one thing bankruptcy is not going to destroy your credit, it is only going to be listed as you have filed (which is a negative mark) and received a discharge.
Bankruptcy will initially lower your credit score, but there are ways to get this back in a very short time. At my law firm we have a program for our bankruptcy clients that allows them to get their credit history score over 700, in as little as two years’ time, making it possible for them to do things such as buy a home or a car, on credit. Basically the way credit works is, you have a certain amount of debts and you have a certain amount of income, after your payment history is taken into account your score is based on how much you owe and how much you earn. Even though bankruptcy initially hurts your score, now you earn significantly more money than you did before (mathematically speaking), simply by the fact you no longer have the debt you had before. As I said before, this is all MATH. You won’t mathematically make more money, but once you take out the debts you owed, which are reflected on your credit history report, now all you’ll have is the income. Once we show our clients how to repair their credit after bankruptcy, the amount of money and time saved through bankruptcy is well worth the initial hits your credit report.
Most people are completely unaware of how important their credit is to them and their livelihoods. Did you realize that having a low credit score, because of a bad debt-to-credit ratio, can cost you tens of thousands of dollars over your lifetime. People think that your credit score only pertains to you obtaining a credit card, car loan or a mortgage to buy a house, there could be nothing further from the truth. 60% of employers check your credit score. Your car insurance company checks your credit score. When you rent a car, they check your credit score. When you go to rent an apartment in a nice location, they check your credit score. Let’s face it, everything important in your life, your credit score is going to be verified to determine if you should be able to take benefit of what you want. Want a new job, if your credit score is bad, your employer is going to give it to the next person in line with the better credit score, as this demonstrates that person is a more responsible candidate to employees than you are. How many tens of thousands or even hundreds of thousands of dollars did you just lose by not getting that dream job you wanted, which went to someone with a better credit score? How much more insurance are you going to be paying on your car, property and your home, over your lifetime, do to a bad credit score? How much extra are you going to pay in life because the credit cards and secured debt that you do have on a higher interest rate than someone with a better credit score than you? The simple fact is most people do not know these truths or take them into consideration when formulating a plan for life. These are the cost of living and they are dictated by your credit score. The simplest, quickest and most effective way to improve your credit score, is to get rid of delinquent accounts being reported on your credit history score and improve your debt-to-credit ratio; there is no better method to doing this than filing bankruptcy!
