Bankruptcy is the legal process of discharging your debts, and it’s designed to give individuals and businesses relief from creditors. Trying to decide if bankruptcy is the right option for you? Then check out this list. If these statements describe your situation, you may want to contact a bankruptcy attorney.
1. You Are Overwhelmed With Debt
Being in debt can be incredibly stressful. If you are thinking about your debts all the time, unsure how to repay them, and constantly fielding calls from creditors, you may want to consider filing bankruptcy.
2. You Want to Get Rid of Monthly Debt Payments
With Chapter 7, you have to liquidate non-essential assets, but the majority of your unsecured debt and all the stress associated with those debts, gets eliminated. Note that many people who choose this option actually don’t end up liquidating anything.This tends to be the best option if you don’t have a lot of disposable income and you want to stop worrying about monthly credit card payments.
3. You Need an Affordable Repayment Plan
That said, Chapter 7 is not the right option for everyone. If you have disposable income and you don’t want to liquidate nonessential assets, you may want to look into Chapter 13. With this type of bankruptcy, you create a payment plan for three to five years, and the plan is structured to be affordable. Once you complete the plan, your remaining debts are discharged.
4. You Have a Lot of Unsecured Debt
You can discharge a lot of debts through bankruptcy, but generally, the most common discharged debts are unsecured debts such as credit cards, signature loans, and lines of credit.In most cases, you cannot eliminate student loans, tax debt incurred in the last three years, and child support payments. Similarly, when your debt is tied to collateral such as a vehicle or a home, you also cannot just discharge that debt unless you are willing to return the asset.For these reasons, it’s important to assess the type of debt you have when you’re considering bankruptcy. If you’re unsure, schedule a consultation with a bankruptcy attorney, bring copies of your financial records, and ask them about the best steps forward.
5. You Are Behind on Car or Home Loans
If you are in risk of foreclosure, bankruptcy can help you to buy time. When you file for bankruptcy, your creditors receive a stay, and they can’t foreclose on your home or repossess your car.If you file Chapter 7 bankruptcy, most of your unsecured debts are likely to be discharged, and then you can use the extra funds to catch up on your mortgage or car loan. Alternatively, with Chapter 13, you can structure your repayment plan so that you catch up on back mortgage payments slowly over time.Chapter 13 also has a cramdown provision for car loans. Essentially, if your car is worth less than you owe, the lender may have to reduce the principal balance owed and lower your interest rate.
6. Creditors Are Threatening Wage Garnishments or Asset Seizures
If you face serious collection activity, contact a bankruptcy attorney as soon as possible. They can halt all collection activity as long as your creditors haven’t started the legal process yet. A bankruptcy attorney can protect your assets and your paycheck and guide you through the process of getting relief.
7. You Want a Fresh Start
Perhaps the biggest reason to consider bankruptcy is because you want a fresh start. You get to wipe out your debts and start over. After a while, you can even start working on rebuilding your credit so that you can obtain mortgages and business loans in the future.
To determine if bankruptcy is right for you, contact us today. At Frances H. Hollinger, Attorney at Law, we work closely with our clients to customize a solution that is right for them.