There are many reasons that people end up in debt. Some reasons include divorce, medical bills and poor financial decisions. Individuals who can’t afford to repay their debts may choose to file for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code.
Before filing, it’s a good idea to consider alternatives like a budget revamp and credit counseling. Filing for bankruptcy has serious financial consequences and will remain on your credit report for 10 years.
1. You’re behind on your mortgage payments
One of the main reasons people file for bankruptcy is that they’re behind on their mortgage. This can be due to unexpected expenses, a loss of income or even divorce.
If you’re behind on your mortgage payments, it’s important to contact your lender right away. They may be willing to work with you to find a solution that lets you stay in your home.
If you can’t catch up on your mortgage, Chapter 13 bankruptcy can help you save your house. This allows you to pay off your past-due payments and current mortgage payment in a repayment plan over the course of several years. It can also let you strip junior mortgages that aren’t secured by the full value of your house and reclassify them as unsecured debt, which receives lower priority and sometimes doesn’t need to be paid back at all.
2. You’re getting calls from bill collectors
When you file for bankruptcy, an automatic stay stops creditors from attempting to collect on debts that were successfully discharged in your case. If a creditor contacts you after this, they’re in violation of the law and could face legal action.
The law requires that you’re completely honest when submitting your paperwork. There are severe criminal penalties for lying to a bankruptcy judge.
Before you decide to file, try negotiating with your creditors. They may be willing to work out a repayment plan that reduces your outstanding debt or spreads your payments over time. You should also create a budget, which will give you a clearer picture of your financial situation and help you find ways to cut expenses. This will save you money and avoid the need to file for bankruptcy.
3. You’re losing your job
Unemployment is a common reason people file for bankruptcy. While it’s possible to pay debt when you have a regular income, it becomes increasingly difficult as time goes by without a paycheck.
If you’re losing your job or your only source of income is unemployment due to
Health reasons, it might be a good time to consider filing for bankruptcy. The process can eliminate your eligible unsecured debt, stop foreclosure and repossession and halt wage garnishment, utility shut-offs and debt collection calls.
However, you should first consider reworking your budget to ensure that you can afford basic living expenses until you find a new job. A credit counselor can help you do this. Also, you should avoid withdrawing from your retirement account if possible. It could negatively impact your financial situation in the long run.
4. You’re suing someone or planning to sue someone
Everyone’s financial situation is unique, and the best way to determine whether bankruptcy is right for you is to meet with a bankruptcy attorney. They can review your entire situation and help you determine which type of bankruptcy to file for and when.
Depending on your individual circumstances, you may want to consider alternatives like credit counseling or mortgage loan forbearance programs before filing for bankruptcy. However, if you are living beyond your means and your debts have outgrown your ability to pay them, bankruptcy can provide immediate protection from creditors, as well as halt foreclosures, repossessions, wage garnishments and utility shut-offs. It can even eliminate some unsecured debt, such as credit card bills. Filing for bankruptcy may also stop civil lawsuits and prevent debt collection actions if they’re already underway. Seek a bankruptcy attorney in Harrisburg, pa for help on the right answers and legal process of bankruptcy.
5. You’re facing foreclosure
If you’re facing foreclosure, filing for bankruptcy can be an option. However, it’s important to understand that bankruptcy isn’t a cure-all. It can still put a damper on your credit score and will leave a mark on your record for years to come.
Before you can file for bankruptcy, you’ll need to take a credit counseling course and fill out all the necessary paperwork. This process isn’t easy, and it takes time. You’ll also have to attend a public meeting with creditors, which can be intimidating.
The main causes of bankruptcy are student loans, medical expenses and job loss. Sometimes, these events can team up to bring you down and push you to the edge of your financial stability. If you’re desperate for a solution, consider speaking with a credit counselor or nonprofit credit counseling agency to see what options are available to you.