What are the Benefits of Filing for Bankruptcy? | Portland, OR

What are the Benefits of Filing for Bankruptcy?

Discover How Bankruptcy Can Help You Breathe Easy

Are you struggling with a lot of debt and wondering if there’s a way out? Filing for bankruptcy in Oregon might be a solution for you. It may sound scary, but the many benefits of bankruptcy can make your life easier.

Bankruptcy can help you manage or eliminate your debts, giving you a fresh start. This article will explain these benefits so you can understand how filing for bankruptcy can help you.

Quick Summary:

  • Filing for bankruptcy in Oregon can provide a solution for individuals overwhelmed by debt, offering a chance for a fresh financial start. It is a legal process for managing debt when payments become unmanageable, offering individuals a reset button on their finances.
  • There are two common bankruptcy options: Chapter 7, offering quick debt relief and the potential for a fresh start, and Chapter 13, which allows for creating a repayment plan to manage debts over time.
  • Chapter 7 bankruptcy can help eliminate most debts, stop creditor harassment, and protect essential property such as homes and cars.
  • Chapter 13 bankruptcy enables individuals to create a repayment plan tailored to their income, helping them keep their property and catch up on missed payments.
  • Bankruptcy offers benefits like automatic stay, debt discharge, exemptions to protect property, manageable repayment plans, and halting foreclosure and repossession.

What is Bankruptcy?

Bankruptcy is a legal way to handle debt when you can’t pay your bills. It’s like hitting a reset button on your finances and giving you a fresh start.

When you owe a lot of money and can’t keep up with payments, you can file for bankruptcy. That means you ask the court to help you manage or eliminate your debts. Depending on your situation, the court can reduce, reorganize, or erase what you owe. 

What are the Types of Bankruptcy?

If you’re considering bankruptcy, it’s crucial to understand the different types and how they work. Here are the common types of bankruptcy:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a legal process that can help you get rid of most of your debts and start fresh. It’s often called “liquidation bankruptcy” because some of your property might be sold to pay off your debts. Chapter 7 is often a bankruptcy filer’s first choice for several reasons. It’s quick, taking only a few months to complete.

When you file for Chapter 7 bankruptcy, the court appoints a trustee to review your assets and debts. The trustee will sell some of your property to pay back your creditors. 

Chapter 7 bankruptcy can be a good option if you have a lot of debt and little income or assets to repay. But it’s important to know that not all debts can be wiped out, like child support, alimony, and some taxes.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy helps you create a plan to pay off your debts over time. It’s sometimes called “reorganization bankruptcy” because it allows you to reorganize your finances and make a plan to repay your debts.

When you file for Chapter 13 bankruptcy, you work with the court to create a repayment plan. This plan outlines how you’ll pay off your debts over three to five years. You make regular payments to a trustee, who then distributes the money to your creditors according to the plan.

Chapter 13 bankruptcy can be a good option if you have a regular income and want to keep your property, like your home and car. It lets you catch up on missed payments and manage your debts in a structured way.

What are the Benefits of Filing for Bankruptcy?

If you’re overwhelmed by debt and feeling like you’re drowning in financial stress, filing for bankruptcy might be a way to get relief. It can be a difficult decision, but it can also bring many benefits. Here are some of the advantages of filing for bankruptcy:

Automatic Stay

When you file for bankruptcy, something called an “automatic stay” goes into effect. That means creditors must stop trying to collect from you once you start the bankruptcy process. They can’t call you, send you letters, or take you to court. That gives you some breathing room and peace of mind.

The automatic stay lasts as long as your bankruptcy case is active. The stay goes into effect the moment your bankruptcy petition is filed and remains in effect until the court issues an order closing the case. 

For Chapter 7 bankruptcy, this is usually a few months. For Chapter 13 bankruptcy, it can last three to five years, depending on your repayment plan.

Debt Discharge

One of the biggest benefits of bankruptcy is that it can wipe out many of your debts. That means you don’t have to pay them back anymore. Here are the types of debts, also called unsecured debts, that can be discharged in bankruptcy:

  • Credit card bills
  • Medical bills
  • Personal loans
  • Utility bills

Bankruptcy Exemptions

You might worry about losing your home, car, or other important things if you file for bankruptcy. But there are laws called “exemptions” that protect specific property from being taken to pay off your debts (11 U.S.C. § 522). That means you can often keep your home, car, and personal belongings even after filing for bankruptcy.

Here are some of the key exemptions under Oregon law:

  • Homestead Exemption: You can protect up to $40,000 of equity in your home if you’re single or up to $50,000 if you’re married.
  • Motor Vehicle Exemption: You can protect up to $3,000 of equity in your car.
  • Personal Property Exemption: You can protect up to $3,000 worth of household goods, such as furniture and appliances.
  • Wages and Income Exemption: A part of your wages is protected from garnishment, which means creditors can’t take your entire paycheck.
  • Public Benefits: Social Security benefits, unemployment benefits, and other public assistance are usually protected.

Repayment Plans

If you file for Chapter 13 bankruptcy, you can set up a plan to repay your debts over time. The repayment plan is a detailed plan you create with the court to pay back your debts over time, usually lasting three to five years.

The court-approved plan will likely reduce your monthly debt payments to a more manageable amount. That makes it easier to manage your payments and keep your property. 

Stop Foreclosure and Repossession

Bankruptcy can also stop foreclosure on your home and repossession of your car. If you’re behind on mortgage or car payments, filing for bankruptcy can give you time to catch up and keep your property.

Stopping foreclosure and repossession can give you peace of mind and reduce stress, allowing you to focus on getting back on your feet financially.

Rebuild Credit Score

While bankruptcy can lower your credit score initially, it can also give you a chance to start rebuilding it. With your debts cleared, you can rebuild your credit by making smart financial decisions. 

Responsible financial management habits like on-time payments for remaining debts and new credit lines can help you rebuild your credit score over time.

Guiding You Through the Benefits: The Vital Role of our Portland Bankruptcy Lawyer

Filing for bankruptcy can offer many benefits if you are struggling with debt. It can help you eliminate or reduce your debts, stop foreclosure and repossession, protect your property, and give you a fresh start. It can also stop creditors from calling and provide peace of mind. 

At Michael D. O’Brien & Associates, P.C., our Oregon bankruptcy attorneys can help you understand the benefits of bankruptcy and guide you through each step. We will explain the different types of bankruptcy and determine if it’s the right path for your financial situation. 

From explaining your options to protecting your property and creating a repayment plan, our bankruptcy law firm will be with you every step of the way. 

Don’t let financial stress hinder you from living the life you deserve. Contact us now to schedule a free consultation, and let us help you take control of your financial future.

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