How can filing for bankruptcy improve your quality of life?

How can filing for bankruptcy improve your quality of life?

Bankruptcy is a major financial decision that will have a significant impact on the life of the Debtor and those who are jointly liable on their debts.   While it does impact those who are jointly liable on debts with the Debtor who files for bankruptcy, if they are repaid according to terms the impact is minimal.  This is especially so in light of the significant benefits that can be derived from a timely filed bankruptcy.  Below we will discuss a number of ways the life of the debtor and his or her dependents can be improved through debt relief under the bankruptcy code.

Stop Constant Collections Calls and Other Credit Harassment including Garnishments

When a person is overwhelmed with Debt and unable to pay their bills on time or in full they are besieged with collection calls on a robo dialing basis from the computer every few minutes all day long at home and at work and on their cell phones.  Often family members are also harassed who were listed as references on the credit application.  The harassment is disruptive to life and to work and is relentless from morning until night.  This is very stressful, as are lawsuits to collect and garnishments from your paychecks or banks accounts to pay the debt involuntarily.  Then a person has not enough to pay the monthly living expenses and disaster strikes financially.  Fortunately the bankruptcy code offers relief from all that .  The filing of a bankruptcy case invokes the Automatic Stay and prevents further creditor calls and or harassment including garnishments.   Debt collectors have to stop calling as soon as someone files for bankruptcy.

Have More Money at the End of Each Month

Bankruptcy can improve the quality of life by allowing the household to have increased monthly disposable income for living expenses and other costs of life.  Struggling to pay bills every month can force some people to go without necessities such as prescription medications that are important but costly. It might not be possible to buy food, pay for heating fuel or maintain a car when all the money goes to back debts or debt service. This causes everyone in the household to suffer the consequences of the debt including families and children.  It will become possible to start budgeting normally again and lead one to an improved standard of living through increased disposable income to pay expenses.  This may create income for activities for children or school related expenses such as field trips they would otherwise have to miss out on due to debt service.

No Threats of Wage Garnishment or Legal Action

Ongoing garnishments, judgment liens and the embarrassment of employer notification of a wage garnishment can jeopardize employment and destroy one’s peace of mind in addition to wreaking havoc on the monthly budget.  Creditors can take 25% of a persons net take home pay or ¼ of their net wages every pay for a wage garnishment.   This type of stress can lead to depression and anxiety and can cause one to lose their job by the disruption of their work routine and the constant calls and harassment.  Filing for relief under the  bankruptcy code  will stop these aggressive collection tactics by creditors and collection attorneys.  After the filing of a bankruptcy a person will not have to worry about wage garnishments or lawsuits to collect pre petition debts.

Start Rebuilding Personal Credit

Credit is very important today as it affects the interest rates you pay for credit and the amount you pay for car and homeowners insurance over your lifetime.  . Bankruptcy will allow someone to start rebuilding credit again which is why is it called a “fresh start.”   This can greatly improve the quality of life over time. Improving credit responsibly after the bankruptcy filing by timely paying debts makes it possible to  borrow money again on reasonable terms and maybe buy a new house or car. Good credit could even lead to higher paying jobs, lower insurance rates and better interest on credit cards.

Prevent Foreclosure and Keep the Home

A final way bankruptcy can improve quality of life is by preventing a foreclosure on a home or providing the borrower the chance to catch up on the mortgage arrearage or delinquency through chapter 13 reinstatement. The threat of losing a home and becoming homeless can be devastating. Filing for bankruptcy will stop banks from foreclosing on a house as it stays creditor activity during the case pendency. Chapter 13 allows them to reinstate and chapter 7 allows them to pay and keep it or surrender it and walk away.  Modification is still available.   The automatic stay stops the foreclosure while the case is open and chapter 13 allows reinstatement over time to stop the foreclosure.

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