The term “bankruptcy” is usually synonymous with “failure,” and in today’s economy, millions of Americans are feeling like failures every year. However, with every cloud, there is a silver lining, and the same is true with bankruptcy. If you are on the fence about whether or not to file for bankruptcy or are just realizing the weight of your decision to do so, here are some reasons why filing for bankruptcy may not be such a bad thing.
A Fresh Start
It’s not every day that a person can begin again with a clean slate, in fact, the only experience that might be comparable is winning the lottery or enrolling in the witness protection program. While bankruptcy will have a lot of negative impact on one’s future finances, the great thing is that it allows the individual to escape unbearable debt, collection phone calls, and endless anxiety.
Foreclosure can actually prove worse to one’s credit score than bankruptcy. When one decides to foreclose, it shows that the debtor was not exercising caution about their choices; creditors will see this move as very irresponsible. However, when one files for bankruptcy, it shows understanding of the debt with an intention to correct it in some fashion.
No Credit, Just Cash
Bankruptcy sometimes stems from the misuse or misunderstanding of credit; when debt becomes too much, an individual will drown. However; declaring bankruptcy gives an individual a lesson in financial responsibility, and serves as a solid foundation to begin managing money correctly. After bankruptcy, people have to work hard to restore their assets, but by using a cash-only system, they can build more protected savings. The money is earned and is safe to create a strong retirement, education or savings account.
Rebuilding is Possible
Bankruptcy is not always the end of one’s ability to achieve an acceptable credit rating. In fact, many individuals who file for bankruptcy find that they can apply for new loans within a few months after the process was completed. The bad news is that the risk will be high, so the principal may be low and the interest rates may skyrocket. The good news? One can slowly, but surely rebuild credit.
Protecting Your Future
Many people are surprised when they learn that their retirement savings are actually one of the few accounts that are protected in the bankruptcy process. When one experiences incredible debt, they may attempt to pay it off with retirement funds. However, this decision could lead to several penalty fees, and may not even pay off the debt. In some cases, individuals who try this will eventually have to file for bankruptcy anyway and will have no retirement account to rely on in the future. By facing bankruptcy head on, one can protect his or her financial future without depleting a retirement account.