Bankruptcy can give you a fresh start, but even just thinking of filing bankruptcy can be overwhelming. Most debtors consider filing bankruptcy only as a last resort because a bankruptcy declaration is viewed as a financial scar, but this is not the case.
Filing for bankruptcy shouldn’t be something you fear, especially since it’s a debt solution that can provide debt relief when you’re struggling with debt. Bankruptcy laws were created to help you get a fresh start financially, and below are a few of the reasons for filing bankruptcy.
What can bankruptcy do?
If you’re dealing with debt such as credit card debt, medical debt, and other kinds of consumer debts, it may be time to file for bankruptcy. Filing a bankruptcy petition can stop debt collectors from making collection calls for debt repayment through the automatic stay. If you’re behind on your monthly payments for auto loans or mortgage, starting the bankruptcy proceeding can also help you avoid repossession of your car and foreclosing on your home.
Aside from the temporary relief provided during the bankruptcy proceedings, your bankruptcy discharge at the end of the bankruptcy process will eliminate most of your unsecured debts. This means that your liabilities for discharged debt are wiped out, and you’ll no longer be responsible for repaying debts that were eliminated in bankruptcy.
When should you file bankruptcy?
There are a lot of situations where bankruptcy filings should be considered as a debt relief option. This can involve various circumstances, such as:
- You’re facing huge medical bills.
- You can only pay using a credit card.
- You got laid off and are currently unemployed.
- You were sued by creditors for debt repayment.
- Your home or car is in danger of being foreclosed or repossessed.
If you’re in any of these situations, you should get in touch with a bankruptcy lawyer to discuss your financial situation and what you can do to get relief.
What are the factors to consider in filing bankruptcy?
Before you start working on your bankruptcy petition, there are a few things to consider if you plan to declare bankruptcy. You first have to check if you’re eligible to file for bankruptcy and determine which of your debts can be discharged in bankruptcy.
The eligibility requirements may vary depending on whether you’re filing for Chapter 7 or Chapter 13 bankruptcy. A local bankruptcy attorney can help you determine whether you are qualified to file bankruptcy.
Chapter 7 bankruptcies are meant for people whose monthly income isn’t enough to make payments for both their debts and their bills. To determine if you qualify for a Chapter 7 bankruptcy filing, the bankruptcy means test compares your gross income to the median income and determines if you have enough disposable income to repay a portion of what you owe.
If you fail the means test, you can still convert your bankruptcy case to Chapter 13. This type of bankruptcy involves restructuring your debt into a debt repayment plan. As such, you’re required to have a steady source of income to ensure that you’ll be able to follow your payment plan. The plan typically spans three to five years and will consider your current income to ensure that the payment amount fits your budget.
If you qualify for bankruptcy, the next step is to evaluate both your unsecured and secured debts. Generally, unsecured debt is dischargeable through bankruptcy, but certain debts (such as alimony, child support, student loans, and tax debts) are considered nondischargeable. Check your state bankruptcy code for bankruptcy information on which types of debts are eliminated in bankruptcy.
If you think bankruptcy is the right for you, it’s best to consult with bankruptcy attorneys who can provide legal assistance throughout the process of bankruptcy. At Dodds Law Firm, we can help you face your debt problems and find solutions that work for you. Call us and request a free case assessment today!