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Debts can overwhelm individuals and businesses unexpectedly. Medical emergencies can clean out a family’s resources. Drought can devastate the family farm or ranch. An untrustworthy or vengeful partner can run up credit card bills, and business expenses can pile up.
Filing for bankruptcy feels like throwing in the towel. But there are several reasons why bankruptcy is not the end of the world. In some circumstances, it could be the best choice to salvage a life spun out of control or a business on the brink of closure.
A Fresh Start
While bankruptcy certainly impacts your credit score, it can actually improve your score in some cases. By the time you decide that bankruptcy is your best option, you’re probably already behind on debt payments, and your credit score has nowhere to go but up. Adhering to a court-imposed repayment schedule makes you look better to creditors after a year or two. When your bankruptcy proceeding is over, you might be able to start fresh with a better credit score.
Bankruptcy can’t wipe away all kinds of debt, but it can resolve others for good, including credit card debt and medical bills. Getting out from under that kind of debt can give you a new lease on life and the determination to control spending, improve saving, and live a simpler life. That’s a major reason why bankruptcy is not the end of the world.
It’s important to understand the different types of bankruptcy so you can thoughtfully consider what to file for. You can sell nearly everything and start over completely under Chapter 7 or develop a payment plan under Chapter 13. Many businesses can pursue a “reorganization” under Chapter 11.
A Way To Rescue the Farm or Ranch
Farmers, ranchers, and fishers have always known hard times, but conditions in 2022 have been particularly severe. Historic heat, drought, and changing ocean temperatures have affected these family businesses in ways not felt for generations.
The bankruptcy code contains a special section, Chapter 12, that’s strictly for farmers, ranchers, and fishers. It’s more streamlined and has much higher debt limits than bankruptcy for individuals. However, it can be difficult for many small agricultural businesses to meet the three- to five-year debt repayment schedule that requires you to put all discretionary funds toward repayment.
Gets Collectors Off Your Back
Incessant calls from debt collectors disrupt your life, destroy your sleep, and make it even harder for you as you struggle to pay your debts. When you file bankruptcy, collectors must stop contacting you until your bankruptcy is complete. At that point, the debts they’re trying to collect will have been “discharged.” They’ll either be erased, or you’ll have a repayment plan in place that should ease the harassment.
When you’re considering bankruptcy, it’s important to seek legal advice to help you pursue the right type of bankruptcy and follow court rules to make sure you file correctly.
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