8 Positive Upsides Of Bankruptcy That Can Shift Your Perspective

May 17, 2024 | Bankruptcy

“Challenges are what make life interesting— overcoming them is what makes life meaningful.” Joshua J. Marine

Bankruptcy is a terrible word, isn’t it? A dark, ominous cloud hangs over those who have made mistakes with money. You’ve heard all the bad stuff about how it can destroy your credit and ruin your life.

But what about the good stuff? What if you could shift your attitude and perspective about bankruptcy so that you no longer see it as a horrible experience? What if you change your mindset about bankruptcy so you view it as an opportunity for a fresh start and a brighter future—one where you not only get a chance at a new beginning, but also one where you become a better person, one who has learned from past financial mistakes, rebuilt better financial habits, and becomes a more resilient and confident consumer? If you are feeling disheartened by your current financial circumstances and uncertain about the future, there’s good news: you have the power to turn things around. It begins with a fresh outlook, hope, and a well-defined plan. If you’re feeling discouraged and unsure about what steps to take regarding your financial situation, understanding the flip side of filing for bankruptcy can provide some comfort and offer a spark of hope for your future.

In this article, we will explore the benefits of bankruptcy and how it can offer you a new start, a fresh perspective, and a more positive outlook on life.

Bankruptcy: What It Is And What It Is Not

Bankruptcy is a legal procedure that gives people and businesses a new start by wiping away or reorganizing their debts. Its purpose is to help people who cannot pay their debts and who need a way out. Bankruptcy may help you get out from under the thumb of debt collectors, stop a foreclosure or a repossession, or protect you from future lawsuits.

It is a common misconception that bankruptcy is a sign of failure or irresponsibility. People can be quick to judge, but it is important for one to understand that bankruptcy is a legal solution for those who are in too much debt. It is not a moral judgment. It is a tool to help get people and businesses back on track.

Types Of Bankruptcies And Their Advantages

There are numerous articles available that provide comprehensive information on bankruptcy law, including a wide range of bankruptcy types. For now, we will just briefly touch upon these types of bankruptcy and what they can do for you without going into too much detail. The most common forms of bankruptcy for individuals are Chapter 7 and Chapter 13.

Chapter 7 bankruptcy offers the opportunity to discharge the majority of your debts, with a few limited exceptions. Conversely, Chapter 13 bankruptcy permits the repayment of debts over a three-to five-year period, rather than wiping out your debts. Chapter 11 bankruptcy is primarily for businesses and provides an opportunity for businesses to reorganize their debt and continue operations.

Each type of bankruptcy has its benefits so it is important to understand your options and determine which type of bankruptcy would be right for you. For our purposes, let us take a look at bankruptcy as a whole and the advantages it can offer.

Benefits Bankruptcy Can Offer 

1 – A Fresh Start

“Every new beginning comes from some other beginning’s end.”  Seneca

Have you ever been so far behind in a contest, competition or race that you would give almost anything to have it end and restart the whole thing? Recreational golfers know the term “mulligan”: it’s what you call a do-over when someone hits a ‘bad’ shot.

Bankruptcy works like a mulligan. It gives an individual or business the option to start over by erasing or restructuring debt, and getting a fresh start. When presented with the opportunity for a do-over, it may be tempting to let pride get in the way and decline; however, it can be a valuable option to consider.

2 – Debt Relief

Failure is simply an opportunity to begin again, this time more intelligently.”  Henry Ford

The constant worry over money can place a tremendous burden on your life. It can consume every area of your life and make it difficult to enjoy the things that you do have. Worrying about money can lead to sleepless nights and even to physical health problems, such as high blood pressure.

Bankruptcy offers relief from overwhelming financial burdens, freeing you from the constant stress of unmanageable debts. With Chapter 7 bankruptcy, in particular, your unsecured debts, such as credit cards, medical bills, and personal loans, are completely wiped out. This frees up money in your budget to pay for necessities and enjoy the things that you love.

3 – Protection From Creditors“Sometimes you have to protect yourself from the negative influences around you to focus on your own growth.” Robert TewCreditors will do anything and everything they can to get you to pay back the money you owe them, at the expense of your financial stability and peace of mind. But once you file for bankruptcy, something called an “automatic stay” stops any and all creditor collection activities against you, including wage garnishment or foreclosure on your property. In addition, the automatic stay ends all telephone calls, letters and all other collection efforts by the creditor that were plaguing you prior to your bankruptcy filing. As a result of the automatic stay, you finally have some peace and quiet, and you feel like you can once again take charge of your finances.

4 – Repayment Plans

“A journey of a thousand miles begins with a single step.”  Lao TzuChapter 13 bankruptcy gives people the chance to come up with a workable plan for paying back their debts. It provides a structured way to settle debts gradually while protecting important assets. You will have to pay a bankruptcy trust through a court-ordered reorganization payment plan. This plan will help you retain your assets while paying off your debts over time. Your debts will be easier to handle, and you will be able to regain control of your finances in the long run.

5 – Asset Protection

“The best way to find out what we really need is to get rid of what we don’t.”  Marie KondoMany people feel that if they declare bankruptcy, they will lose everything. This is simply not true. Bankruptcy is intended to put you back on your feet, not cripple you. Every state has a list of assets that are exempt from creditors. In most states, if you file bankruptcy, you will have to give up some of your assets to pay your creditors, but the majority of people who file bankruptcy keep most of their assets, including their home, car and personal possessions. Having an experienced bankruptcy attorney who is familiar with bankruptcy law for your state is crucial to protecting your property and assets when filing for bankruptcy.

6 – Improved Credit Score

Rock bottom became the solid foundation on which I rebuilt my life.”  J.K. Rowling

Yes, you read that correctly. Filing for bankruptcy can actually help you build a better credit score over time. Late payments, high balances, a high debt-to-income ratio, and a high number of credit accounts have already likely damaged your credit score. Once the terms of your bankruptcy go into effect, many, if not all, of these factors will be eliminated. Your credit score may take a hit initially, but it will allow you to rebuild your credit over time. By responsibly managing new lines of credit and making timely payments, you’ll be back to having a strong credit score in no time.

7 – Financial Education

“Experience is simply the name we give our mistakes.” Oscar Wilde

The conditions of bankruptcy may require you to undergo credit counseling, which can provide you with valuable financial education and guidance to help you avoid future financial challenges. Learning sound money management and spending practices can help you avoid repeating past mistakes and prove to be a very useful skill in the future.

8 – Emotional Relief

“The greatest wealth is the absence of worry.”  Shantideva

The stress that accompanies financial difficulty doesn’t end with money. The fear of losing your house, of losing your job, and of losing the stability of your family, can have a devastating impact on your state of mind. Bankruptcy can ease that burden, allowing you to focus on yourself and your wellbeing instead.

Get The Help You Need Today!

There are times when things are not as bad as they seem, and a new point of view can help us see what alternatives are available. If you are in a tough spot financially, but haven’t given the option of bankruptcy much thought, it may be time to reconsider. It’s a big step, and it is always advisable to get professional advice before you make a final decision. If you have any questions, or would like to schedule a free consultation to examine your options, reach out to our team at Ted Machi & Associates, P.C., today.

“When you have exhausted all possibilities, remember this: you haven’t.” Thomas Edison

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