No matter how hard you try, it is not always easy to look on the bright side and succeed in making the best out of a sticky situation. This is especially the case when it comes to financial predicaments that jeopardize your and your family’s livelihood. The rise in small and personal businesses has been great on both individual and local community levels; however, it has fueled the propagation of the bankruptcy phenomenon.
More people with average incomes are forced to declare bankruptcy to escape being sued by their debt collectors. Alternatively, many file for bankruptcy because they have been let go from work and are unable to pay off their mortgage. But what happens after the damage is already done? You must be wondering if this is one of those situations where you can make lemons out of lemonades.
Read on below for some insights on whether you can use bankruptcy to your own advantage.
You Can Get Better Deals on Future Loans
If you declare bankruptcy, it means that you have gone through all of your financial sources and exhausted them all. Any financial obligations are dropped, and your creditors cannot take any legal action against you. In countries like Canada, you can only file for bankruptcy through a trustee who will oversee and administer your bankruptcy case. As discouraging as the word “bankrupt” may sound, if you look at the bigger picture, it is more like hitting the restart button on your financial situation and starting on a clean, debt-free state. This automatically puts you into the low-risk category when applying for future loans where you are eligible for more favored rates. This is a great chance for you to start anew and move forward despite your less than perfect credit score.
It Can Ease Your Tax Burden
Although taxes are not among the common bankruptcy discharges as they are considered priority debts, you can still benefit from a significant reduction in the tax money you owe the government. The type of tax and its due time will, of course, affect whether you would be eligible for a tax exemption or not. Income tax, for example, is among the ones that can commonly be discharged depending on how long it has been accumulated. Being a diligent taxpayer will substantially help your case when applying for tax relief on account of bankruptcy. Any prior tax evasion cases will most likely dismiss your request immediately.
You Will Not Be Able To Worsen Your Situation
In a sense, you will be protected from your own bad judgment. After legally declaring bankruptcy, all of your assets including your house, car, and any other financial sources will be under your trustee’s control. This is especially helpful if being financially irresponsible was the reason behind going bankrupt. Since your trustee will be in charge of repaying your creditors as they deem fair, you will be spared from any potential harm that might have arisen from facing your collectors. However, it is important to note that it is not easy to hand over all of your assets and have your bank accounts frozen, unable to access them without your trustee’s approval.
You Can Benefit From Money Management Sessions
When you are bankrupt, the court will put you through some counseling sessions on money management. This can be a great chance to understand how you should handle any financial issues in the future. You will learn about budgeting, loan management, asset administration, and how to always stay on top of your finances. Granted, this does not change your current status, but it helps to have some positive outlook to be able to surpass this crisis. The more diligent you are, the better your chance will be to get your credit back on track and restore some financial normalcy.
Your Pension Remains Intact
Retirement savings are kept safe under bankruptcy. This is very important if you are applying for bankruptcy at a critical time of your life when you are nearing the retirement age. The last thing you want is to add to your worries, and fear for your own and your family’s well being. Had you not applied for bankruptcy, your creditors would have taken legal actions, and you would’ve been forced to liquidate any accounts that you have to be able to repay your outstanding debts and avoid being sued. After you overcome your bankruptcy crisis, you can continue on from where you left off and further invest in your retirement account.
Applying for bankruptcy can sometimes be the lifeline you need to sustain your livelihood. Even though it will take a toll on you both mentally and emotionally, you have to remain optimistic that it will pass. Many successful business people have experienced bankruptcy at one point in their lives. It does not mean that you are a failure, but at the end of the day, how you come out of your bankruptcy is what eventually counts.
