It’s generally advised you avoid having to file for bankruptcy if possible. However, there are times when taking this step is the better solution given the circumstances involved and the potential consequences associated with any other options that might be available. On a positive note, should bankruptcy be what’s appropriate for you, an experienced attorney can guide you through the process and help you make well-informed decisions along the way. In fact, if bankruptcy is handled the right way, it can have some beneficial results for you when all is said and done. Below, five of the top reasons to consider filing for bankruptcy are discussed.
1. Your Home Is In Foreclosure
If you’re at a point where the process of foreclosure on your home has already begun due to issues with an inability to maintain payments, bankruptcy stops such efforts. When bankruptcy is filed, what’s called an automatic stay prevents lenders or creditors from taking any further action. It’s important to note that with Chapter 7 bankruptcy, your lender can still attempt to lift the stay by filing a motion. If this motion is successful, you may still lose your home. Chapter 13 is the type of bankruptcy that allows you to keep your home while getting caught up on your payments.
2. You’re Being Sued for Debt
Many reputable creditors or other businesses or medical providers seeking payment for a debt often make several attempts to collect what’s owed before pursuing legal action. If such efforts are unsuccessful, however, legal action may be taken against you in an attempt to collect what’s owed. In such instances, you may end up also having to pay interest on the debt, or even related legal fees.
If you know you don’t have the resources to make good on the debt in question, it makes more sense to consider bankruptcy rather than letting things get worse. You even may be able to have the debt eliminated. However, filing for bankruptcy doesn’t necessarily stop all legal action a creditor may take against you.
3. You Want to Avoid Wage Garnishment or Repossession
Some creditors or lenders will attempt to have your wages garnished to collect back payments. Bankruptcy may be able to stop such attempts, at least until a final decision is made or an acceptable settlement is reached. If the debt you owe is specific to one thing, like a car, your lender may attempt to repossess the item in question. Let’s go with the car example. If you qualify for Chapter 13 bankruptcy, you may be able to hang onto your car while you make good on what you owe. With both Chapter 7 and 13 bankruptcies, you may still be able to get your vehicle back if the lender already took it.
4. You’re at an Impasse with Your Creditors
Bankruptcy isn’t always about getting debt entirely eliminated. In some instances, you may just want a fair shot at making good on your payments in a way that makes sense, given your financial situation. For example, if you’ve honestly tried to negotiate, you may reach a point where you’re at an impasse with your creditors. In other words, they’re offering options that would be too much of a burden for you, and they’re not willing to budge.
With situations like this, you may be able to work with an attorney to reach a fair bankruptcy settlement with your creditors. In some cases, simply having a lawyer act as the go-between with you and your creditors could produce better results than attempting to negotiate directly.
5. You’re Getting Divorced
Divorce can be an expensive process – and it can result in a significant shift in your financial situation. On top of the emotional toll of divorce, you may experience substantial income losses. For instance, you may have to rely solely on whatever income you earn rather than a combination of what you and your spouse earned together. Also, if you and your soon-to-be-ex had shared accounts or joint debt obligations, you may be responsible for a portion of this debt.
After the divorce is settled, you could very well find yourself saddled with a lot of extra debt you can’t realistically manage. In this instance, filing for bankruptcy often provides a chance to liquidate your assets and get a fresh start with debt arrangements you can manage.
Why You Should Hire a Bankruptcy Attorney if You Need to File for Bankruptcy
While you can file for bankruptcy yourself, doing so can be risky due to the complexity of bankruptcy laws. Plus, it’s surprisingly easy to overlook deadlines and other requirements, especially when you’re already stressed out about debt. An attorney understands the nature of bankruptcy and what’s involved with it. A lawyer can also provide advice specific to your situation. What’s more, having a lawyer on your side as you go through bankruptcy increases your chances of ultimately benefiting from the process.