The Facts About Bankruptcy

According to uscourts.gov there were about 12.8 million consumer bankruptcy petitions filed in the federal courts over the 12-year period between October 1, 2005, and September 30, 2017.  Filing for bankruptcy is never an easy choice – you’ve probably worked hard throughout your life, purchasing one of the houses among the Calgary homes for sale or somewhere else, hoping to settle down and enjoy a good quality of life.  Things go great, but then suddenly you get laid off from your job, there’s a medical emergency or something else unplanned that throws a wrench into it all. It can make you feel as if you’ve failed, but oftentimes it’s just a streak of bad luck. Bankruptcy might actually be the best solution – here’s when it can be a good thing.

Protecting Your Business

Starting a business is always risky – it could fail due to economic or market downturns, problems with a partner or a long list of other reasons. When a business fails it can leave huge piles of debt with no income to pay it off.

If you’re struggling as a business owner, filing Chapter 11 may be your lifesaver. It will help reduce your debts so that you can regain control and look for new ways to become profitable. Filing Chapter 13 could help save an overextended small business, allowing owners to restructure debt, working with the court to come up with a plan to pay it over a period of three to five years.

Ending Torturous Collection Calls

When you’re behind on your bills, those collection calls can be brutal. Financial experts say once people get seriously behind on their debt, with at least one account 120 days or more overdue, those money problems tend to get even worse. Court judgments, balances sent to collections and so on tend to increase. Those that file bankruptcy benefit from the automatic stay that stops nearly all collection efforts, wage garnishments, lawsuits and the like. It provides freedom from certain debts, for example, Chapter 7 wipes out debt like medical bills, credit card debt, personal loans, business debts, past due utility bills and rent, and civil judgments – with the exception of fraud.

Improving Your Financial Footing

There is a misconception that filing bankruptcy will totally destroy your finances, but the reality is, it can be the first step in regaining financial footing so that you can be financially stable again. You’ll have better access to credit as compared to those who don’t file bankruptcy and just allow their debts to become long overdue. Those who complete bankruptcy are more likely to be granted new credit within just a year-and-a-half as compared to people who fell 120 days or more behind but didn’t.

The downside is that the credit limits you’ll be given are likely to be low at first and your credit score won’t recover completely for another 10 years, assuming Chapter 7 bankruptcy which falls off credit reports after a decade. While that may seem like a long time, it could be even longer if you dig yourself into a deeper hole before finally making the decision to file.

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