The filing of bankruptcy has its advantages and disadvantages. This is the first part of a 5 part series on the advantages of filing filing bankruptcy, which will be further followed by a multiple part series on the disadvantages of filing bankruptcy.
Most Debts are Discharged. Usually, the primary goal of filing a Chapter 7 bankruptcy is to have unsecured debts discharged. Unsecured debts are usually in the form of credit card accounts, medical bills, and signature loans, though there are numerous forms of unsecured debts. Obtaining the discharge in the bankruptcy eliminates these debts from creditors ever being able to collect on them.
As for secured debts, they may be able to be paid off at a reduced rate through a Chapter 13 bankruptcy; in the case of a second mortgage on homestead property, if the amount owed on the first mortgage exceeds the value of property, there is a process whereby not only will the second lien be discharged, but can be removed as a lien on the property. This may sound odd, but normally secured property continues to have a lien attached to it, although the debt against the debtor has been discharged.
This provides for a quick relief from the stress and anxiety associated with having overly burdensome accounts with creditors, and harassing collection calls and letters, which can lead to health problems, mental stress, and marital stress.
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