No one really wants to file for bankruptcy. It’s not fun and it doesn’t feel good to have to admit that you simply don’t have the money to pay your debts. However, even though it may not be an enjoyable experience, it’s also one that is extremely important and which can provide some real and tangible benefits to those who do it. Here are five great reasons why you may want to consider declaring bankruptcy:
It Will Get the Creditors Off Your Back
While it is possible to file a cease and desist letter to get collection agencies to stop calling you all day long, the reality is that doing so doesn’t mean that you don’t owe the money anymore. You still owe all the money and the collection agencies, now deprived of their most potent weapon in the effort to make you pay up will likely engage in more aggressive tactics, including filing a lawsuit against you to collect damages and garnish your wages. Filing bankruptcy puts a stop to all that and lets you finally get back on your feet.
It Forces Creditors to Take a Deal
Most credit gurus will tell you that if possible, you should try to contact your creditors directly and make a deal with them to repay what you owe. The reason is simple: doing so will be less damaging in the long run for your credit. The bad news is that creditors aren’t required to make a deal. If they feel they can get more money out of you through a lawsuit, they have the right to refuse your offers and requests for a lower interest rate or other repayment deals.
Once you file for bankruptcy, they will no longer have that option. An impartial judge will instead work with you to come up with a realistic budget and if necessary can void any debts that you owe to allow you to start fresh.
Here’s a little-known fact about bad debt: if you owe a lot of money, your creditors may decide after a certain point that the money is simply not recoverable. If they decide that is the case, they can legally write it off as a tax deduction. However, there is a huge catch: if they write it off, then you are on the hook for income taxes on the money since the money that was written off is considered to be taxable income by the IRS. Getting your debts discharged in bankruptcy will avoid this problem, allowing you to truly start fresh.
Protect What You Have
If you can’t afford to have your wages garnished, you simply need to prove that to a bankruptcy judge (your lawyer will help you with that) and then your creditors will not be able to touch your income or your savings. However, if you don’t declare bankruptcy, then it’s all fair game. They still have to go before a judge to get an order to garnish your wages or seize your property, however without bankruptcy protection, it’s much easier for your creditors to do so.
Peace of Mind
Finally, probably the best reason for filing for bankruptcy is simply that it provides you with peace of mind. You won’t have to worry about creditors calling you, you won’t have to worry about how you’re going to pay the bills and you won’t have to worry that they’ll take your savings. You’ll then be free to begin rebuilding your financial life in peace, which is definitely a worthy reason for filing for bankruptcy.