Getting Your Finances Back On Track

How to tell when you need to file bankruptcy

On Behalf of | Dec 17, 2020 | Bankruptcy

Despite their best efforts, many people have difficulty managing their debt effectively. When one past due bill gets paid off, another seems to appear out of nowhere. If your debts are weighing you down in this manner, you likely feel that giving your best effort to satisfy them is the right thing to do. Depending on your circumstances, though, it may make more sense for you to file bankruptcy.

Creditors are trying to collect your debts

No one likes creditors hounding them, and you likely feel stressed by their constant efforts to collect your debts. Some may even go as far as filing a lawsuit against you. Once you file bankruptcy, though, an automatic stay goes into effect. This injunction requires creditors to stop their collection efforts. It will also put a halt to their lawsuits.

It is possible that one or more of your creditors could try to seek relief from your automatic stay. If they receive it, they can continue their collection efforts during your bankruptcy case. Whether this relief is granted, though, will be decided at the discretion of the bankruptcy court.

You are about to lose your home or your vehicle

If you are delinquent on your mortgage or auto loan payments, you are likely concerned that you could lose your home to foreclosure or your vehicle to repossession. Once you file bankruptcy, though, the automatic stay will put a stop to these actions. If you file Chapter 7 bankruptcy, you can work with your mortgage and auto loan lenders on plans to make up your arrearage. If your lenders are willing to negotiate agreements with you, you may be able to keep your home and your vehicle. If you file Chapter 13 bankruptcy, you will satisfy your mortgage and auto loan debts through a repayment plan. This plan will help you pay off these debts over a period to three to five years at a rate that reflects your income.

You have mounting medical debts

Medical debt is the number one reason why people file bankruptcy in the United States. A freak accident or emergency surgery can leave you with massive medical bills, which can be difficult, if impossible, to pay off. By filing Chapter 7 bankruptcy, you will likely be able to discharge your medical debts. By filing Chapter 13 bankruptcy, you will satisfy your debts through your repayment plan. So long as you follow its terms, you may be able to discharge any remaining medical debts you have when your case ends.

Depending on the nature of your debts, filing bankruptcy could provide you with the relief you need. A legal professional can help you understand whether it is an appropriate option in your financial situation.