Have You Ever Wondered Why Bankruptcy Laws Exist and How it Protects You?
Most people think bankruptcies are just a way out of paying your debt. Most people think if you’ve filed for bankruptcy that you did something wrong. And most people are embarrassed to even consider filing for bankruptcy.
Ever wonder why it exists? Ever wonder why bankruptcy protects you? C’mon, you’re supposedly this person who recklessly spent more than what they earned or got greedy with your business and bit off more than you could chew, right? I don’t know the exact number, but people like that are actually very rare, yet they’re also entitled to the benefits and protections of bankruptcy.
From my experience, almost all of my clients have been hard working individuals or couples who incurred unexpected debt or pursued a business venture and could not turn a profit due to market fluctuations or poor economy. When that happens, there has to be a system to deal with it. A system has to be able to do something with the debtor and creditor. And because the need to file for bankruptcy varies, different types of bankruptcies must exist to make it possible for someone to have debt forgiven without losing everything and still attempt to get the creditor some of their money back. Bankruptcy exists because something must be done for people who can’t pay back what they owe, otherwise they will continue hurting financially and the people whom they owe money would not be able to recover anything.
How does a bankruptcy protect you? First, bankruptcy law is federal law. It is superior to state law. When you can’t make credit card payments or mortgage payments, those creditors file lawsuits against you in state court. But because bankruptcy law is federal law and it’s superior to state law, that means you get an “automatic stay”, basically a time-out on your state court lawsuits and all your assets (money, car, home, and personal property) are protected from creditors until your bankruptcy is over. During the bankruptcy process, your attorney can help so you are able to keep as much as legally possible under an exemption.
So, as you can see, contrary to common perception, bankruptcy is a good thing, not a bad thing. It may have its downsides, but it’s time to view it as a way to protect yourself and get a fresh new start.