What is the Fresh Start in Bankruptcy?

What does the term “fresh start” mean when it comes to your financial situation and filing for bankruptcy? The fresh start refers to the promise that after you file for bankruptcy and your case is successfully completed, your eligible debts are discharged, meaning you have been granted a release from the legal obligation to repay your debts. It also means you are protected from any collection efforts by your creditors including bills or collection letters sent to you by mail or email, a phone call, or the filing of a lawsuit. Any attempt by a creditor to collect a discharged debt from you can be penalized by contempt in the federal bankruptcy court. Financially, you are able to start over managing your finances and rebuilding your credit without a crushing load of debt hindering your financial future. Hence, the fresh start.

Chapter 13 bankruptcy does not provide exactly the same kind of fresh start, but it still exists to an extent. The Chapter 13 payment plan set up as part of the filing means you will be moving in the right direction and are able to reset or restart your financial situation.

Keep in mind that going through a bankruptcy in Oklahoma is a process. You do not automatically end up debt-free the moment your case is filed. There are immediate benefits, like the automatic stay, but in general, you have to go through and complete the process before you can enjoy all of the benefits of the fresh start.

The Supreme Court and Bankruptcy

The concept of a fresh start is not some marketing gimmick created by bankruptcy attorneys to encourage more people to file. The Supreme Court of the United States stated in 1934 how filing for bankruptcy affects individuals:

“[Bankruptcy] gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

What a Financial Fresh Start Is Not

As great as it is, the fresh start granted by bankruptcy might not eliminate all of your financial problems. Bankruptcy does not discharge all types of debt. The most common debts not discharged after bankruptcy typically involve taxes, student loans, alimony, child support, and other specific types of court-ordered debts.

Further, the financial fresh start you receive in bankruptcy does not mean your debts disappear. The debts actually continue to exist, but the bankruptcy court eliminates your legal obligations to pay them and prevents creditors from trying to collect the debts.

While this is rare, there are some people who even choose to pay their discharged debts on their own terms after bankruptcy. These people typically filed bankruptcy to end all of the aggressive collection efforts and increasing penalties, but always intended to repay their discharged debts. This is definitely against our advice, but a debtor is free to make his or her own decisions and we respect those choices.

Bankruptcy: It is Not Perfect, but it is Still a Powerful Solution

The most important thing to remember when it comes to bankruptcy is that it WILL help you, even if it does not solve every single financial problem you are facing. Bankruptcy eases your debt burden. Even if all of your debts are not discharged after the completion of a Chapter 7 case, you will undoubtedly be in a better financial position than you were before filing.

Additionally, you will also acquire new financial knowledge and learn new credit and money management skills during the process that you may not have learned if you had not filed for bankruptcy.

If you want to learn more about how the bankruptcy financial fresh start can help you, call 918.551.8955 or click “Schedule a Free Virtual Consultation” on our website to setup a FREE and confidential initial consultation with a bankruptcy attorney in Tulsa and begin working toward securing your financial future.

*We are a debt relief law firm in Tulsa, Oklahoma.

*We help people file for bankruptcy relief under the Bankruptcy Code.