When the bankruptcy rules changed back in 2005, many people believed that it would make it extremely difficult, if not impossible, to file for bankruptcy protection. Those with debt problems felt that they no longer could consider bankruptcy as a possible option. Now, the biggest worry that many individuals will have is that filing for bankruptcy may be impossible to overcome.
This mental hurdle often can prevent those individuals from considering bankruptcy until a financial situation becomes much, much worse. This can limit the potential options that may be available, and could mean that there will be more work to be done before the bankruptcy can be completed.
But what happens when a person files for bankruptcy? For starters, an automatic stay goes into effect. This means that all creditor harassments must stop, allowing the debtor a chance to get a plan in place.
Long-term, there may be some difficulty in the early stages adapting to the new changes that come with filing for bankruptcy. However, this is usually much easier than when trying to come up with finances to pay monthly bills.
Filing for bankruptcy may also help a person restore his or her credit rating. Usually, by the time bankruptcy is filed, a person has missed several payments, either on a mortgage, credit cards or other bills. Each of these missed payments can have a negative impact on a credit rating.
Bankruptcy will show up on an individual’s credit history, but soon after filing, it is possible to rebuild that rating. More funds will be available to pay debts. Since so many other people have had to file for bankruptcy, it is no longer seen as being financially irresponsible. It may actually be the first step toward financial freedom.
Source: FoxBusiness.com “Will Bankruptcy Scare Off Future Spouse?” Sally Herigstad, August 2, 2012