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What are the benefits of filing for bankruptcy?

On Behalf of | Aug 29, 2019 | Firm News

Filing bankruptcy in Massachusetts has its pros and cons. If you are thinking about taking this course of action there are definite upsides. Once you learn about the benefits of bankruptcy, you gain better insight into whether this is the right step for you.

According to the American Bar Association, filing for bankruptcy provides you the opportunity to start over. The ability to rebuild your financial future is a welcomed change when you have a mountain of debt. When you file chapter 7 bankruptcy, most of your consumer debt gets discharged (or forgiven). Consumer debt falls under two categories. It is either secured or unsecured. Examples of secured debt include car loans and home mortgages. With secured debt, a creditor can foreclose on your home or repossess your vehicle if you default on the loan. Unsecured debt is not associated with any of your personal assets, such as a house. Your credit card debt falls into this category.

You may also receive exempt status when you file bankruptcy. This means certain assets you have are off-limits to creditors. However, exempt laws vary from one state to the next. Because of this, there is no standard criterion used for determining which assets you can keep.

One of the main advantages of filing for bankruptcy is you no longer get contacted by creditors. All debt collection activities must cease as soon as you file a petition. Creditors who do not comply may pay fines and/or get hit with a contempt of court order. The courts call this a stay, and it applies to chapter 7 and chapter 13 bankruptcy filings.

While this information is not legal advice, it can help you understand the process and what to expect.