When is Bankruptcy the Answer to Personal Debt Issues?

The word bankruptcy may send shivers down your spine, but it’s not as defeating as it may sound. If you’re facing heavy amounts of debt and there’s no relief in sight, then bankruptcy may actually be the best option for reclaiming your finances and getting things straight.

Four Reasons People Choose Bankruptcy

Bankruptcy exists for a reason. It’s a way for individuals to escape when they’re in the financial “danger zone” and there don’t appear to be any other methods of getting out. Understanding why people choose bankruptcy and what it means for their financial future can help you decide whether it’s an option for you.

  1. Approaching Foreclosure

 If you’re way behind on your mortgage and the bank is getting increasingly frustrated with your lack of payments, they’ll most likely start the foreclosure process. For many people, this is where the fight against debt gets personal and painful. Thankfully, there are ways to delay or avoid foreclosure through bankruptcy. By filing for Chapter 13 bankruptcy, you can actually pause the bank’s efforts to foreclose while you attempt to catch up on mortgage payments.

On a related note, you need to read up on your state’s homestead exemption laws. Most states – such as Florida – have them and they actually prevent creditors from coming after your home in order to satisfy a judgment. Any creditor telling you differently may be trying to bully you into making quick decisions.

  1. Long-Term Debt Struggles

 Is debt something you’ve struggled with for many years? Has it affected the way you live your life on a daily basis? People who struggle with long-term debt over the course of many years are the best candidates for bankruptcy.

Filing for bankruptcy not only relieves the constant pressure of lenders and creditors calling your phone and ringing your doorbell, but it also frees you up for a fresh start. You can meet with a financial advisor and learn smart habits that will allow you to better yourself in the future.

  1. Facing a Lawsuit from Debt

 Are you facing some sort of lawsuit for your debt?  People are frequently sued over medical debt, car accident damages, credit card debt, and breaches of contract. If any of these suits are being brought against you, a bankruptcy filing will put an immediate end to them. You can have these debts discharged and the legal proceedings will be forced to stop on the grounds of an automatic stay.

 But don’t automatically assume that bankruptcy will stop all lawsuits. There are a number of actions not stopped by automatic stay, including child support, divorce, spousal support, paternity suits, child custody, domestic violence, collections of taxes that aren’t dischargeable, and some evictions. 

  1. Possible Financial Windfall in the Future

 Are you expecting some sort of financial windfall in the near future? Perhaps an aging parent who is going to leave behind a lot of money in their will or a spouse who’s deeding some property over to you? Whatever the case may be, you won’t want to file for bankruptcy after the fact. These assets could be used to satisfy your debts. An attorney can provide specific advice, but filing before the fact can allow you to void debts without running these assets dry.

 Consider All of Your Options

 You should never make a rash decision in regards to bankruptcy – whether that means pursuing or avoiding it. Bankruptcy has its role and can be helpful for those looking to escape financial issues and earn a fresh start.

Just make sure you know what you’re getting into beforehand and speak with an experienced bankruptcy attorney early and often.

Categories: Debt

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February 11, 2017 When is Bankruptcy the Answer to Personal Debt Issues?