Undoubtedly, there are many myths associated with bankruptcy that prevent people, who otherwise may be eligible and could benefit from such an action, from going ahead with the filing process. While there are certain consequences of discharging one’s debt in bankruptcy, as with anything, it is important to realize that many debtors greatly benefit from the advantages of going ahead with the process. With this in mind, below are a few of the main advantages of a bankruptcy for you to consider should you be considering it as a viable debt relief option:
- You can prevent, delay or cancel foreclosure proceedings on your home. Under Chapter 13 bankruptcy, you can submit a three to five year payment plan to the bankruptcy court. The court is entitled to approve it even over your creditor’s objections, and it can include your overdue mortgage payments. As long as you remain up-to-date on your payments, you can prevent your mortgage lender from foreclosing. Although a Chapter 7 bankruptcy won’t directly prevent your mortgage lender from foreclosing, it can result in a discharge of junior mortgages and unsecured debt, leaving you with more money to pay your first mortgage.
- The automatic stay gets your creditors off your back immediately. As soon as you file for Chapter 7 or Chapter 13 bankruptcy, the bankruptcy court will grant an automatic stay that prevents your unsecured creditors from initiating or continuing collection action. Even your mortgage lender and other secured creditors will be subject to the stay for a few weeks after you file, and they will need permission from the court to resume foreclosure or repossession-related activities.
- You can keep some, if not all, of your property. Chapter 7 includes a list of exemptions that allow you to keep some of your property, or to demand the value of the exemption if your property is auctioned. These exemptions include home equity, equity in your primary vehicle, home furnishings/appliances, and work tools. For example, if the equity in your car is worth less than the value of your exemption, you can keep your car. If your car equity is worth more than the exemption, your car will be sold, but you will be entitled to the value of the exemption. Federal law includes a list of bankruptcy exemptions, and Michigan law has its own list. You may select either federal or state rules based on which rules serve you best. Speaking with a qualified bankruptcy attorney is your best bet to learn which exemptions may apply to you.
- You will receive a discharge of your debt. Under Chapter 7, once your nonexempt property is auctioned or seized, you will receive a discharge of all debts included in the bankruptcy, even if you haven’t fully paid your creditors. Under Chapter 13 you receive a debt discharge after you fulfill your payment plan; however, by then you will have paid at least some or your bankruptcy debts anyway. Some forms of debt, such as tax penalties, cannot be discharged in bankruptcy.
- Your interest charges will be frozen. Upon filing for bankruptcy, the interest charges on your debts will be frozen by the court so that they will no longer accumulate. This can help you escape the "interest trap" if, for example, you are liable for a lot of high APR credit card debts.
- Wage garnishment actions will cease. Any wage garnishment will be immediately canceled, allowing you to take home more pay and avoid irritating your employer with the extra paperwork involved.
- You will gain financial breathing room. Once you complete the terms of your bankruptcy, more of your income will be freed up. This can serve as a psychological release valve allowing you to regain your peace of mind.
Contact Attorney Nancy Neal Joyce Today!
After nearly two decades of helping clients get out of life altering debt, Nancy Neal Joyce is intimately familiar with the ins and outs of consumer bankruptcy law, especially as it is practiced in Michigan bankruptcy courts. Call her Livonia, Michigan office at (734) 427-7772 to set up a free initial consultation, and she will be happy to help you develop a debt relief plan that works best for you.
