1. Eliminate the legal obligation to pay many of your debts.
This process of cleaning the board is called debt discharge. The goal of a discharge is to reduce debt to give you a fresh start. Either through direct bankruptcy (Chapter 7 bankruptcy) or through reorganization (Chapter 13 bankruptcy), most or all of your debts can be discharged.
2. Stop foreclosure on your home and allow you to make effective payments to catch up on your delinquent mortgage payments.
If your home is in foreclosure, Chapter 13 Bankruptcy will stop the foreclosure anytime before the sale. Bankruptcy does not eliminate unpaid mortgages on your property. Rather, bankruptcy will structure a plan to pay off your mortgage arrears (the amount that is past due).
3. Prevent your car or other property from being repossessed.
Even if the creditor has repossessed your car, filing for bankruptcy can force you to return your car or other personal property (if bankruptcy is filed quickly enough). Past payments that you have not made will be consolidated into your Chapter 13 bankruptcy plan. After this, you will no longer pay the finance company, but instead will make monthly payments to your Chapter 13 Bankruptcy trustee, who will then pay to the finance company.
4. Reduce or even eliminate high medical bills.
Sometimes an unfortunate accident or a recently discovered major illness can completely ruin a family. Many families have to make decisions about the allocation of bills. Often times, once-large bills are dwarfed by large medical bills acquired by a loved one. Filing for Chapter 7 bankruptcy can greatly reduce the number of medical bills.
5. Recent loss of job.
Studies show that job loss is one of the most common reasons people file for bankruptcy. This is very easy to see. A family can be comfortable with two, maybe even one salary. They can take on regular amounts of debt, join clubs, and pay normal bills with relative ease. Suddenly one or both spouses lose their jobs and a family must go from two salaries to one. Losing a job is closely related to high medical bills. Losing a job means that this family may be left without the insurance protection once provided by their employer. Often times, these two factors combined create an almost impossible mountain to climb without the help of bankruptcy.
6. Stop harassing creditors.
Some creditors do not always take the correct course of action when trying to collect a debt. Often times, creditors will persistently call the home of a particular debtor with degrading and abusive behavior. This is not only unethical, it can rise to the level of illegal. In essence, bankruptcy will put the claims of many creditors on hold and stop harassing phone calls and other inappropriate behavior altogether.
7. Restore or prevent your utilities from being shut off.
As you’ve probably seen, many of these reasons overlap. Some lead to another. If your home is at risk of foreclosure, your utility bill may also be at risk of being written off. Filing for bankruptcy can prevent the utility company from leaving you in the dark.
8. Provide assistance for large amounts of student loan debt.
While it is true that your student loans will not be eliminated like other types of unsecured debt, bankruptcy can consolidate your student loan debt. This consolidation will allow a debtor to make monthly payments through Chapter 13 bankruptcy that are within the debtor’s financial capacity.
9. End wage garnishments.
Chapter 7 bankruptcy will stop the wage garnishment. Wage garnishment basically takes away your weekly earnings many times leaving you without needs. Chapter 7 Bankruptcy allows you to buy basic necessities for yourself and your family. Chapter 13 Bankruptcy will also help in this regard.
10. Challenge certain claims of fraudulent creditors.
Bankruptcy will allow you to challenge these claims from creditors who are trying to collect more money from you than you actually owe. An attorney can provide the support and backing you will need to approach these creditors. Lawyers often level the playing field between a large creditor and a single debtor. Filing for bankruptcy with an attorney can stop a creditor’s fraudulent claim.