What ""Automatic Stay"" is and how it can benefit you. The """"automatic stay"""" essentially halts all pending litigation taken against you by creditors to collect a debt or to obtain possession of collateral that secures one or more of your debts. This is the initial benefit of filing for bankruptcy. Assuming you electronically filed your bankruptcy petition prior to the sale, the automatic stay will prevent your foreclosure sale (at least temporarily) if you are facing foreclosure and have an upcoming sale date. The same applies if you are being evicted from a rented apartment or if your financed vehicle is being repossessed. If you have a lawsuit filed against you by an unsecured creditor, such as a credit card company or medical billing company, the automatic stay will halt any court proceedings, and if the court has already ordered your wages garnished, the automatic stay will stop that as well. The """"Automatic Stay"""" is essentially your first line of defense in regaining control of your life and stopping the hemorrhaging; the automatic stay of bankruptcy will do just that for you, halting all harassing phone calls and legal proceedings. For some, the ability to put an end to their debts is the greatest and most essential benefit of filing bankruptcy.
Most people find the psychology of bankruptcy somewhat confounding until they have actually gone through the process. The majority of individuals are extremely apprehensive about the prospect of filing for bankruptcy and how it will affect their lives. But if there is one thing I've learned, it's that the psychological benefit of declaring bankruptcy vastly outweighs the anticipated repercussions you will have to endure in the future. Some may ask, ""Won't this negatively impact my credit score and make it so difficult to get back on track?"" If you're contemplating bankruptcy, you've already damaged your credit history report and have delinquent (unpaid) payments, which are likely to be documented as negative statements on your credit history report. Some of you may have experienced a foreclosure, signed a Deed-in-Lieu, or participated in a mortgage modification, all of which can negatively impact your credit score. Yes, a bankruptcy filing will remain on your credit report for seven to ten years (10 years for chapter 7 and seven years for chapter 13). All of this, however, pales in comparison to the psychological benefits you will derive from answering the phone without fear. If you are contemplating bankruptcy, the tinkling of your phone probably sends shivers down your spine. When the phone rings and it's not someone you know because their number didn't show up or it's listed as ""Restricted,"" you know what I'm talking about and you understand the anxiety I'm referring to. This psychological benefit only increases once you receive your discharge and begin moving on with your life, putting the pieces back together, but without having to glance over your shoulder. People are unaware of the extent to which negative thoughts and depression can prevent them from attaining everything they could and should in life. Insolvency will allow you to eliminate your anxiety without the use of medication. Once you are able to wake up in the morning and look forward to the day ahead, rather than detest what your life has become, there are no adequate words to describe the psychological benefits you will experience.
The elimination of debts is an apparent advantage of filing for bankruptcy. Let's speak simple math for a moment and discuss the length of time required to pay back your debts while surviving, as well as how this affects your life, credit score, and ties everything together. Some individuals may wish to resolve their debts or attempt to repay them over time. The simple mathematics of interest and the reality of our existence, however, render this endeavor nearly impossible. Consider a simple bill of $10,000 on a credit card, with $200 monthly payments and an interest rate of 18.99%; it would take you 8.5 years to pay off this debt, and you would pay over $10,000 in interest alone (effectively doubling your bill) before you paid it off. This one bill would double in less than ten years, and you would struggle to pay it off the entire time. This is just one example of a bill; now add all of your other bills and attempt to pay them, and you'll understand what we're talking about. Bankruptcy allows you to retain thousands of dollars that would have been used to pay interest on debts that could have been discharged. This sum can be used to buy a home, a car, to pay bills, and even to establish a college fund for your children. Imagine all the things you could do in the future if you weren't paying interest on debts that you could have discharged in bankruptcy. You have a finite amount of time to achieve your goals; are you going to spend it paying off debts that could have been discharged in bankruptcy and giving yourself a fresh start, or are you going to continue living in the same rat race you've been in for years?
Your credit report must be the greatest advantage of declaring bankruptcy. The majority of people are unable to comprehend this section because their first thought is that bankruptcy will negatively impact their credit score. Yes, bankruptcy will be reported on your credit report for a number of years, but the positives outweigh the negatives significantly. At this juncture, the majority of people become confused: ""How can you help my credit if bankruptcy will destroy it?"" In the first place, bankruptcy will not ruin your credit; it will only be noted that you have filed (which is a negative mark) and received a discharge.
Initially, filing for bankruptcy will lower your credit score, but there are methods to recover quickly. In as little as two years, my law firm's bankruptcy clients are able to obtain a credit history score of over 700, allowing them to purchase a residence or a car on credit. Essentially, the way credit works is that you have a certain amount of debts and a certain amount of income, and after your payment history is considered, your credit score is dependent on the amount you owe and the amount you earn. Even though bankruptcy initially lowers your credit score, you now earn substantially more money than before (mathematically speaking) due to the fact that you no longer have debt. As stated previously, this is all math. Mathematically, you will not earn more money, but after paying off your obligations, which are reflected on your credit report, you will only have income. Once we demonstrate to our clients how to repair their credit following bankruptcy, the amount of money and time saved by filing for bankruptcy is well worth the initial dings to your credit report.
Most individuals are entirely unaware of the importance of credit to their livelihoods. Did you know that having a poor debt-to-credit ratio can cost you tens of thousands of dollars over the course of your lifetime? People incorrectly believe that your credit score only affects your ability to obtain a credit card, auto loan, or mortgage to purchase a home. 60% of employers conduct a credit check. Your auto insurer will examine your credit score. When you rent a car, your credit score is checked. When you go to rent an apartment in a desirable location, your credit score is checked. Let's face it, your credit score will be used to determine if you should be granted access to everything that is significant in your life. If you have a poor credit score and want a new position, your employer will give it to the next person in line with a better credit score, as this indicates that person is a more responsible candidate than you. How many tens of thousands or even hundreds of thousands of dollars did you just lose because someone with a higher credit score got the dream job you wanted? How much more will you pay for auto, property, and home insurance over the course of your lifetime if you have a poor credit score? How much more will you pay throughout your lifetime because your credit cards and secured debt carry a higher interest rate than someone with a superior credit score? The simple fact is that the vast majority of people do not know or contemplate these truths when creating a life plan. These are your living expenses, and they are determined by your credit score. The easiest, shortest, and most effective way to improve your credit score is to eliminate delinquent accounts reported on your credit history score and improve your debt-to-credit ratio; there is no better way than filing bankruptcy!""
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