This is a situation that can work to your advantage, and you can have your bankruptcy pay off your debts by releasing funds from certain investments.
Obviously, you could contend that the reason a person declares bankruptcy is because he or she has no valuable assets. While this may be the case in many instances, you must examine your financial situation and determine if you can use any assets to pay off your obligations after filing for bankruptcy.
Debts can be a difficult burden to bear, but you may have investments in avenues such as real estate that could be used to reduce or even eliminate your outstanding debts. In fact, this is a common strategy for individuals with substantial assets of this type, who successfully have bankruptcy pay off their debts.
If you are still uncertain about the context, discussing numbers may assist. Your property may have accumulated significant equity over time. If you have a mortgage of $100,000 on your home and the equity is $20,000, then selling your home for full value could add $20,000 to your bank account, allowing you to pay off any unsecured debts or other urgent debts. This is one reason why homeowners choose to have their debts discharged through bankruptcy.
If you have defaulted on mortgage payments, there is a very real risk that your creditor will eventually foreclose on your residence. This would leave you destitute, with no asset in the form of home equity and no way to reduce your debt load. This is notably true for those who file for bankruptcy under chapter 7 as opposed to chapter 13, where mortgage payments may be restructured.
Declaring bankruptcy can prevent the bank from foreclosing on your home and give you the opportunity to liquidate your assets. If your outstanding debt is less than the value of your home, you may wind up with extra funds after paying off your debts. If you are in a similar circumstance, declaring bankruptcy to eliminate debts can be a wise decision.
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