Many people consider bankruptcy when they have more debt than they can repay. In most cases, an unexpected event occurred, such as job loss, a major illness or death, that caused the person to fall behind on payments. Fortunately, the U.S. Bankruptcy Code is written for people in those exact situations. Chapter 7 bankruptcy will erase most unsecured debts and give filers a chance to start over.
The first benefit of bankruptcy is that most creditors have to stop collection actions when a bankruptcy petition is filed. They can’t even call or send letters asking for payment. If the creditors were not interested in taking a settlement offer before the bankruptcy was filed, they can’t do it after their customer files for bankruptcy protection. For people who have had to turn off their phones to avoid creditor calls and who receive a stack of collection letters on a daily basis, this benefit alone is worth the expense of filing for bankruptcy.
The next benefit is credit counseling. Since 2005, everyone who files for bankruptcy protection must attend two credit counseling sessions. The first session takes place before the petition for bankruptcy is filed. A certificate of completion must accompany the petition. During the session, the counselor reviews the filers credit report and discusses alternatives to filing bankruptcy. Pre-bankruptcy credit counselors also help their clients develop a budget so they can live within their means.
The second counseling session must be completed before debts are discharged. This session covers budgeting, money management and responsible use of credit. Many bankruptcy filers find this counseling session very helpful as they learn to make better financial decision for themselves and their families.
It is sometimes possible to keep a mortgaged home or a financed vehicle after filing Chapter 7 bankruptcy. The experienced bankruptcy lawyers at Rapa Law Office P.C. can help a client determine if they are eligible to keep their property and if doing so is a good idea for them. Clients who had credit problems before they bought their house or car may have very high interest rates which would make keeping up with the payments during and after bankruptcy difficult. In some cases, allowing the mortgage company to foreclose on the property is a better choice.