For most people, the idea of bankruptcy is a daunting one. Many people assume that the bankruptcy process comes with only negative connotations and consequences. In fact, the opposite is true. In many situations, people are finding that filing for bankruptcy can be more beneficial than they ever thought possible.
When you file for bankruptcy, the first thing that is granted by the court is an automatic stay order. This order grants you immediate protection from creditors and debt collection efforts. That means that any lawsuits, garnishments, repossessions, and even foreclosure, proceedings are halted. Further, creditors are prohibited from contacting you as long as the automatic stay order is in place.
Anyone dealing with delinquent debts knows that having protection from harassing collection calls, threatening letters and notices of default is a huge relief. The automatic stay is one of the first and most immediate benefits of the bankruptcy process. Even better is that this order becomes permanent for any debts that are granted the discharge in your bankruptcy case. That means that once your debts are discharged by the court, creditors of that debt cannot attempt to collect in the future.
Another protection benefit that bankruptcy can offer is property exemptions. The Bankruptcy Code outlines several specific areas of your personal property that can be protected from liquidation in your case. Depending on your state of residence you may be able to exempt 100 percent of your business’s value under these exemption laws. Motor vehicles, jewelry, furniture, tools of the trade, insurance benefits or retirement funds are all examples of areas that could be exempt from liquidation in your bankruptcy case. Outside of bankruptcy, there is no such guarantee that a creditor could not sue you for the rights to liquidate your personal property to satisfy the debt. Only bankruptcy can work to protect what is yours legally.
Aside from keeping you away from creditors and out of the reach of seizure and liquidation, filing for bankruptcy is often one of the best forms of debt relief. While there are other options for resolving your debt, some debts are best managed in bankruptcy. For example, mortgage debt can be a tricky type of debt to resolve directly with a lender. Many mortgage lenders are quick to foreclose and may not be willing to negotiate a solution with you. Other debts, like credit cards and medical bills, can take years to pay off through alternative means of debt relief; whereas, they can be quickly erased in a bankruptcy filing.