If you file for bankruptcy, you’ll likely see some changes to your credit report. Your debt will no longer appear on your credit report, and creditors won’t be able to collect from you.
But before you file for bankruptcy, consider these benefits of bankruptcy.
Chapter 7 Bankruptcy: The Good News
The first thing that comes to mind when someone hears the word “bankruptcy” is probably not a good one. It’s usually something like “I’m going to lose my house,” or “My car is totaled.” But in fact, there are many reasons why people choose to file for bankruptcy.
The most common reason is because they have too much debt. They can’t pay their bills anymore, so they decide to stop making payments. This may seem like a bad idea at first, but it’s actually better than paying off all of your debts over time. If you don’t make any payments at all, you could end up losing everything — including your home and even your car.
Another reason people file for bankruptcy is because they’re behind on their taxes. Filing for bankruptcy stops collection efforts by the IRS, which means you won’t get letters demanding money. And if you owe back taxes, you might also qualify for an income tax refund.
Another benefit of filing for bankruptcy is that it protects your Social Security number. Creditors often use this information to track down other debts you’ve incurred. When you file for bankruptcy, all of your financial records become part of the public record. So anyone who wants to know about your finances has access to them.
In addition, you’ll receive a discharge of your debts. In a Chapter 7 bankruptcy, you’ll only need to repay what you can afford to pay. You’ll still have to pay for things such as attorney fees and court costs, but those expenses aren’t included in the amount you must pay.
In a Chapter 13 bankruptcy, you’ll have to pay back more of your debts. However, unlike in a Chapter 7 bankruptcy, those payments will continue throughout the duration of your plan.
You’ll also have a fresh start. Once you file for bankruptcy, your old debts will disappear from your credit report. That means you’ll never again have to worry about getting rejected for a loan or having to pay high interest rates.
Chapter 11 Bankruptcy
If you own a business, you may find yourself facing some tough decisions after filing for Chapter 11 bankruptcy. For example, if your company isn’t profitable enough to support itself, you may not be able to stay open. Or if you close your doors, you’ll lose your employees’ jobs.
However, there are benefits to filing for Chapter 11 bankruptcy as well. It gives you breathing room while you figure out how to turn your business around.
For example, when you file for Chapter 11 bankruptcy, you can continue operating your business without worrying about creditors coming after you. Plus, you can negotiate with your creditors to lower your debt.
One advantage of filing for Chapter 11 bankruptcy is that you don’t have to liquidate any assets to pay off your debts. Instead, you can work with your creditors to restructure your loans. This allows you to avoid foreclosure and protect your property.
Another advantage of filing for Chapter11 bankruptcy is that you won’t have to give up your home. During a Chapter 11 bankruptcy, you’re allowed to keep living in your house.