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Reasons To File For Bankruptcy

Posted on December 10th, 2021

No one should feel ashamed for seriously considering filing for bankruptcy. Financial problems can make anyone feel worn down, and in desperate need for a solution. Many people think about filing for bankruptcy, but worry about what the downsides could be. If you file for bankruptcy, your credit score may take a temporary hit and you may have to sell off some assets to fulfill debts. However, in general, the benefits outweigh the cons because it provides a way to get out of serious financial trouble. 

Filing for bankruptcy means that an automatic stay will be enforced, where creditors are no longer permitted to contact you about outstanding debts. If they do, they are in violation of the law and you must get a lawyer’s assistance right away. Creditors are forbidden from contacting you so that you can focus on a bankruptcy plan that helps you get out of financial difficulty. 

For example, Chapter 7 bankruptcy in particular offers an elimination of unsecured debts, which are debts that the individual has not pledged property as collateral. By comparison, secured debts are those that someone has agreed to an item of property as collateral, such as a vehicle loan or mortgage. The other bankruptcy filings that may be advantageous to an individual or business are listed below:

  • Chapter 9 Bankruptcy: Used by municipalities such as towns, counties, cities, and school districts.
  • Chapter 11 Bankruptcy: Otherwise called “reorganization bankruptcy” that is available to both businesses and individuals. 
  • Chapter 12 Bankruptcy: Used by family farmers or fishermen who are dealing with financial distress, and who will create a plan that pays back their creditors over the span of 3-5 years. 
  • Chapter 13 Bankruptcy: Otherwise called “wage earner plan”, where a person with stable income develops a plan to pay back at least a part of their debts. 
  • Chapter 15 Bankruptcy: The purpose of this bankruptcy chapter is to deal with cases where someone has debts in more than one country. 



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