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3 positive consequences of bankruptcy

The thought of bankruptcy may be intimidating, and you may assume it will absolutely destroy your credit score and make you lose your property. Despite the fact that it sounds scary, it is not all bad news. 

Believe it or not, filing for bankruptcy comes with plenty of benefits, too. Here are some important consequences of bankruptcy you should know about before you file. 

1. Wiping out your debt

One positive effect of the bankruptcy process is the debt discharge. This discharge prevents your creditors from collecting most of your pre-bankruptcy debts. Some of the debts you can eliminate through bankruptcy include:

  • Credit card charges
  • Late rent
  • Unpaid utility bills
  • Car loans
  • Mortgages
  • Medical bills
  • Personal loans
  • Certain tax debts

However, the discharge does not apply to every type of debt. You will want to talk to a bankruptcy law attorney about what debts you may have to keep paying. 

2. Automatic stay

Another advantage of filing for bankruptcy is when the automatic stay goes into effect. An automatic stay is a court order that stops creditors from harassing you. It also helps you keep some of your precious property, such as your home and cars. This is great if you are facing foreclosure or fear losing your vehicle. 

3. Credit score

While going bankrupt inevitably lowers your credit score, there is good news as well. Discharging your debt means you have the opportunity to rebuild your credit after bankruptcy. While it will take some time for your bankruptcy filing to be off your credit report, it may be good for your credit in the long run. After all, it is difficult to build good credit when you are drowning in debt. It is important to remember the big picture when it comes to increasing your credit score. 

There are plenty of positive effects of bankruptcy. You do not need to be afraid of the process.

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