The misconception about bankruptcy is that people that can't pay their debts for one reason or another use it as a way of cheating the system. Others believe that you can be prepared for anything that happens to you and therefore bankruptcy shouldn't be provided. 

In either case, these answers are wrong. The federal government put in place the ability to file because people make mistakes, face tragedies in their lives and they often have little to no control about the actions of others. 

• Discharge of debt: This gives people a fresh start. This type of bankruptcy is common as it allows a free and clear slate. They could be under a lot of financial stress due to credit card misuse or there could be another underlying problem that put them in this position. 
• Stop foreclosure: Foreclosure is a process in which the mortgage lender moves to take back the home from the owner who is not making monthly payments as agreed on it. Filing Chapter 13 bankruptcy can help these debts to be reorganized to make it easier for the mortgage payments to be made. Chapter 13 does stop the foreclosure process as long as it is done before the sale of the property.
• Medical bills. With or without health care coverage, medical bills can easily pile up and get to the point of being overwhelming. Many people use bankruptcy to help them to either eliminate medical bills or to reduce them significantly.
• Loss of employment: Many people have to file bankruptcy because they have lost their job and they can no longer make payments as they were doing. While the financial situation before their employment loss may have been okay, after the loss many people struggle with high amounts of debt they can't pay.
• Garnishments: Chapter 7 bankruptcy will end some types of garnishments. If wages are being garnished because of debts that need to be repaid, these debts can be eliminated. In addition, filing bankruptcy can sometime help people to stop utilities from being turned off or from losing assets such as cars (when they file Chapter 13.) 
• Stop creditors. For some the reason for filing bankruptcy is as simple as stopping creditors from calling. Creditor harassment has been shown to be the deciding factor for people who are struggling with debt repayment. Having the financial difficulty that goes along with it is important though, as you need to be facing dire financial situations to qualify. 

The misconception about bankruptcy is that people that can't pay their debts for one reason or another use it as a way of cheating the system.  Others believe that you can be prepared for anything that happens to you and therefore bankruptcy shouldn't be provided. 

In either case, these answers are wrong. 

The federal government put in place the ability to file because people make mistakes, face tragedies in their lives and they often have little to no control about the actions of others. 

If you are considering bankruptcy, it is essential to explore the reasons why this may be good to you.  Many people file one time in their lives and live a productive, good credit life afterwards.  Other people do abuse the system, but new laws which have been put in place can help to stop these abuses. 

The credit industry is often hurt by such abuses, which in turn hurts every consumer that uses credit with increased fees.  If you are suffering from financial hardship, you should consider if you need to file.

What Are Reasons For Bankruptcy?

 There are many reasons why people file.  Federal law dictates that the debts should be a financial hardship beyond control.  Here are some of the most common reasons people file.

·         Discharge of debt:  This gives people a fresh start.  This type of bankruptcy is common as it allows a free and clear slate.  They could be under a lot of financial stress due to credit card misuse or there could be another underlying problem that put them in this position.

·         Stop foreclosure:  Foreclosure is a process in which the mortgage lender moves to take back the home from the owner who is not making monthly payments as agreed on it.  Filing Chapter 13 bankruptcy can help these debts to be reorganized to make it easier for the mortgage payments to be made.  Chapter 13 does stop the foreclosure process as long as it is done before the sale of the property.

·         Medical bills.  With or without health care coverage, medical bills can easily pile up and get to the point of being overwhelming.  Many people use bankruptcy to help them to either eliminate medical bills or to reduce them significantly.

·         Loss of employment:  Many people have to file bankruptcy because they have lost their job and they can no longer make payments as they were doing.  While the financial situation before their employment loss may have been okay, after the loss many people struggle with high amounts of debt they can't pay.

·         Garnishments:  Chapter 7 bankruptcy will end some types of garnishments.  If wages are being garnished because of debts that need to be repaid, these debts can be eliminated.  In addition, filing bankruptcy can sometime help people to stop utilities from being turned off or from losing assets such as cars (when they file Chapter 13.) 

·         Stop creditors.  For some the reason for filing bankruptcy is as simple as stopping creditors from calling.  Creditor harassment has been shown to be the deciding factor for people who are struggling with debt repayment.  Having the financial difficulty that goes along with it is important though, as you need to be facing dire financial situations to qualify.

 There are many other reasons to consider filing bankruptcy.  Every person's situation is unique, which is why attorneys have been instructed by the new bankruptcy laws to understand why the individual has been in this position. 

When there are situations that are beyond control, or you simply have made mistakes and can't get out of them, filing bankruptcy can be a good move.