Immediate relief benefits of filing for bankruptcy

If the American economic crisis of the past few years has taught us anything, it is that individuals at nearly all income levels can suddenly and unexpectedly experience financial fallout. In addition, the economic crisis has educated Americans about the reasons that individuals may need to file for personal bankruptcy. Once stigmatized as a mark of fiscal irresponsibility, bankruptcy has become an avenue that allows even the most financially responsible Americans to regain their footing during difficult times.

It has recently become common knowledge that the most common reason that individuals and families opt to file for bankruptcy is insurmountable medical debt resulting from an unexpected injury or illness. Even upper-middle class Americans with a solid nest egg may not be able to recover from a sudden battle with cancer on their own, for example.

Bankruptcy may provide both immediate relief for individuals struggling with debt, as well as an ability to rebuild a solid financial foundation for the future. Depending on an individual's circumstances, Chapter 7 or Chapter 13 bankruptcy may be viable options. Broadly defined, Chapter 13 allows individuals with a steady, reliable income to restructure their debt without losing significant assets. Chapter 7 bankruptcy allows consumers to cancel many kinds of debt after certain assets are sold and profits used to reimburse creditors.

In addition to the long-term benefits of bankruptcy, filing generally means that creditors will be unable to contact you or harass you regarding your debt in any way until the process is complete. For individuals struggling with mounting debt, these benefits may be well-worth the temporary challenges or filing for personal bankruptcy.

Source: Windy City Times, "Bankruptcy can be a new beginning," Roger McCaffrey, Oct. 30, 2012