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3 Signs You Need to File for Bankruptcy

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  • Jill
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  • October 4, 2019

3 Signs You Need to File for Bankruptcy

The idea of filing for bankruptcy can be scary. Many people don’t even consider it as a solution to their financial problems. Often they feel embarrassed or ashamed about the subject. After all, filing for bankruptcy can feel like giving up and admitting defeat. But, that doesn’t have to be the case for you. If you’re struggling to keep up with your bills, at risk of losing your home or skipping payments to make others, declaring bankruptcy may be the fresh start you need. It can help get your finances back on track, setting you up for a more stable financial future

What is Bankruptcy?

Bankruptcy laws are in place to help people who are no longer able to pay their creditors. Their aim is to help people get out from under overwhelming debt. You can settle debts by liquidating assets to pay them off, or by creating a manageable court-ordered repayment plan. In Chapter 7 bankruptcy, also known as liquidation bankruptcy, the debtor’s nonexempt property is sold to pay back creditors. In Chapter 13 bankruptcy, also known as reorganization bankruptcy, a payment plan is created under which the debtor repays the debts over three to five years

How to Know If It’s Right for You

Deciding to file for bankruptcy protection can be a difficult choice. The following are three clear signs that you may need to file:

You are at risk of foreclosure.

The housing market has recovered from the collapse of 2008. However, there are still plenty of homeowners struggling to pay their mortgage. If you are in danger of losing your home because you can’t keep up with your mortgage payments, filing bankrupt could help you get current on your past-due payments. It may help you avoid foreclosure.

You are being sued by debt collectors.

If you fail to make payments on a debt, the unpaid debt may be turned over to a collection agency. You may begin receiving phone calls and letters from the agency attempting to collect on the debt. If these go unanswered, the collection agency may file a lawsuit to try and force you to pay what you owe. However, once you file as bankrupt, the court will issue an automatic stay against your creditors. This puts an immediate stop to collection actions, including debt-collection lawsuits. 

Your wages are being garnished.

In some cases, if a creditor is unable to collect on a debt, the creditor may sue you in court to get a court order to garnish your wages. This ensures they receive the money owed. Wage garnishment is a legal process in which your employer must withhold a certain amount of your paycheck and send it to the creditor. This money goes towards paying off the debt. If your wages are being garnished, filing for bankruptcy can put an automatic stay in effect and stop the garnishment process

How a Bankruptcy Attorney Can Help

You may be wondering how to know if you should file for bankruptcy. Maxed out credit cards, piling up bills, or foreclosure notices are signs you should seek advice. No one wants to admit that they are struggling to pay their debts. However, while bankruptcy may seem like giving up, it can actually be a positive step forward in relieving yourself of stressful debts.
If you are considering filing for Chapter 7 or Chapter 13 bankruptcy, having an experienced bankruptcy attorney on your side may help. Working with an attorney will help you determine which chapter is right for you.

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