Bad things do happen to good people. If you are overwhelmed with debt, to file bankruptcy may be a wise choice. The most important thing for a debtor is to first examine both bankruptcy and nonbankruptcy options and to determine which option is best for them.

There are multiple reasons to consider bankruptcy as an option such as:

1. Option to make regular monthly payments on secured debts such as mortgage or auto loan while curing arrearages;

2. Lowering monthly payments on such debts as auto loans, but still be able to retain the vehicles;

3. Getting a fresh start with little or no debt remaining;

4. Re-establishing credit;

5. Stopping collection activity such as garnishment and/or repossession.

It is important for the debtor to be realistic about their financial position. There are financial signs a debtor should be mindful of that will help a debtor know when they may need to file bankruptcy.

1. More than one month behind on mortgage;

2. Behind on vehicle and unable to catch up;

3. Unable to meet your basic monthly expenses without using credit to make your expenses;

4. Major loss of income, or unusually high increase in expenses such as medical bills;

5. Tax debt that can’t be paid off within 12 to 24 months;

6. Unable to afford to make more than the minimum payments on your debt;

7. If you have received a notice that your home is going to be foreclosed;

8. If you have received a notice that your car is going to be repossessed.

Bankruptcy can provide the debtor with the opportunity to stabilize their finances. While filing a bankruptcy may initially decrease the debtor’s credit score, it is no worse than multiple charge-offs, repossessions or a foreclosure that continue to be reported to the credit bureaus each month. Other types of reporting on the debtor’s credit can continue into the future, while the reporting of the bankruptcy is only entered as of the date of the filing and discharge. Often a person can re-establish his/her credit faster with a bankruptcy filing and a fresh start.  A person who has many of the above credit issues can see a rise in their pre bankruptcy credit score in a short time after completion of the bankruptcy proceeding.

As with all things timing is everything when it comes to filing bankruptcy. Whether the debtor’s are choosing to file a Chapter 13 or a Chapter 7 bankruptcy, the last 6 months of income (not counting the month of filing) is extremely important. If the debtor gets bonuses on an irregular basis, they may need to file either before or after a bonus in order to maintain eligibility.

How can filing Bankruptcy help?

In most cases, the bankruptcy can assist someone in the following ways:

1. Bankruptcy can give the debtor’s family a chance to start over and regain financial stability.

2. Bankruptcy can allow the debtor and/or the debtor’s family to repay a portion of debts and still retain their home, cars, personal property and dignity.

3. Bankruptcy can eliminate most debts, and for many people can eliminate all of their debt.

4. Bankruptcy can stop a foreclosure of the debtor’s home or other property.

5. Bankruptcy can stop auto repossession and if the debtor’s auto has been repossessed recently, Bankruptcy may allow the auto to be returned.

6. Bankruptcy can stop wage garnishment.

7. Bankruptcy can stop IRS or state tax levies.

8. Bankruptcy can stop the termination of utility services.

9. In some cases, bankruptcy can be the fastest way to re-establish credit.

Bankruptcy is a lifeline extended by the government that provides the debtor with an opportunity for a fresh start and the opportunity to take control of their financial future and ensure. While many are concerned about the stigma associated with filing bankruptcy, it is important the debtor remember that bad things do happen to good people. Contact us to find out which bankruptcy may be best for you. Don’t wait! 

-Written by Eric Days (Partner at Guerra | Days Law Group)

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