When deciding whether to file for bankruptcy, most people are very concerned about what their creditors can do to them. Debtors want to avoid wage garnishments, bank account levies, and foreclosures, so they live in fear of their creditors. What most people don't realize is that this balance of power changes the minute the debtor seriously starts to think about filing for bankruptcy.
Bankruptcy is the ultimate negotiating trump card, and you, the debtor are the person holding it. This is because when you actually file the bankruptcy, many creditors are entitled to nothing, whether they agree to it or not. Other creditors can have their loans modified and reduced by the courts.
Maybe you have talked to a collection company, and offered to pay them $50 a month until the debt is paid, but they refuse anything less than $500. Or perhaps your mortgage lender has been losing your loan modification paperwork, or won't lower your rate. When you tell these people that you might have to file for bankruptcy, then suddenly the tables turn and you have the power. If you file for bankruptcy then the collection company gets nothing, so suddenly that $50 a month looks pretty good. You can also strip down and discharge some mortgages, and pay the arrearage over time, so the mortgage lender loses power also. What is more, these effects happen whether the creditors want them or not. They have no more say in the matter.
The second your bankruptcy is filed, the creditors lose the right to collect from you and must negotiate with your attorney. If you hire a good attorney he or she will know the laws and make sure that you, not the creditors, get the best deal.