A firmly established principle of bankruptcy law through the years is that bankruptcy serves two functions: the protection and payment of creditors; and the provision of shelter and a “fresh start” to debtors experiencing financial burdens. While this principle acknowledges the repayment of debts, most consumer bankruptcy cases pay little or nothing to creditors. And that’s just one of the ways that bankruptcy provides a fresh start: It provides relief from the payment of burdensome debts.
Even if one acknowledges that the “fresh start policy” merely refers to and provides a label for the various mechanisms under the Bankruptcy Code that alter the relations between debtor and creditor, bankruptcy allows a debtor to move forward from a stagnant financial quagmire.
Here are some of the ways that bankruptcy provides a fresh start:
- Bankruptcy eliminates burdensome debts
A bankruptcy discharge infinitely stops creditors from collecting a debt. In effect, debts are forever eliminated. Chapter 7 allows debtors to liquidate assets in return for the elimination of debt. Using available exemptions, most Chapter 7 debtors never have to liquidate any assets but still get to discharge all their debts. Chapter 13 allows debtors to reorganize and repay a portion of their debts while eliminating or discharging the remainder.
- Bankruptcy stops creditor contact
The constant harassment of creditors is one of the most negative aspects of becoming delinquent on a debt. It is not uncommon for creditors to use unscrupulous practices to get paid. At the immediate moment that a bankruptcy petition is filed, creditors must cease all contact with a consumer. If they continue to contact you they face sanctions under federal law. The Morrison Law Group prides itself on protecting our clients after they file bankruptcy. Every former debtor needs and deserves this type of protection from the practices of creditors who often engage in unscrupulous, even illegal, business practices.
- Bankruptcy puts you in a position to immediately start rebuilding credit
Although a debtor’s credit score goes down after filing a bankruptcy case, he or she may start rebuilding credit immediately upon receiving a discharge at the completion of the bankruptcy case. More than some debtors have reported their credit score increased by 100 points within a year of filing bankruptcy. The alternative is remaining stagnant and doing nothing. This will surely result in a credit score taking an infinite downward spiral. You may also apply for credit cards and loans after filing bankruptcy. While the interest rate may not be the optimum, it will provide the opportunity to make debt payments on time consistently, which rebuilds credit.
- Bankruptcy stops garnishment
The garnishment of wages or a bank account is an eventual reduction of an individuals’ disposable income. Bankruptcy’s automatic stay stops the garnishment of wages or a bank account and returns important income to a debtor facilitating a fresh start.
- Bankruptcy reduces stress
When people experience financial difficulties in the form of paying bills late or not at all, the uncertainty of their financial future may potentially create stress at unmanageable levels. They fear the unknown and, therefore, may fear the worst. And then there’s the usual creditor harassment. The reduction, if not elimination, of this stress by filing bankruptcy, clearly outweighs any notion of bankruptcy’s so-called negative effects.
Debt collectors want to be repaid and are rarely sympathetic. They will not stop calling unless you know your legal rights. An experienced bankruptcy attorney like Theron Morrison will make them stop calling you and assert your legal rights on your behalf. Call 801.456.9933 today to schedule a FREE consultation. We are Utah’s only statewide bankruptcy law firm and have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.