16 Jul When You Should File for Bankruptcy
Drowning in debt? You may want to consider filing for bankruptcy. The majority of people associate bankruptcy as negative; however, filing for bankruptcy allows individuals to get relief from debts, so they can make a fresh financial start. While bankruptcy will take a toll on your credit score, it prevents creditors from collecting pre-existing debts. Here are four reasons why you should consider filing for bankruptcy.
Losing your job is a common reason to file for bankruptcy. Chapter 7 bankruptcy, or liquidation bankruptcy, is the best option in this case because it liquidates all your non-exempt assets to pay off creditors. In order to file under Chapter 7, you must pass the means test. If your income is below the median, then you pass the test and don’t have to take any further steps.
If you’re in medical debt, you should file for Chapter 7 bankruptcy. If you qualify, then your discharge will wipe out your medical bills along with your other general unsecured debts. There is no limit on how much medical debt you can discharge in a Chapter 7 bankruptcy, but you still have to qualify for it.
The only way you can pay for things is using a credit card
Struggling with credit card debt? Before you consider filing for bankruptcy, you should see whether or not you can afford to pay back the debt. If you make enough income, you may be forced to pay back some of your debt through Chapter 15 repayment plan. Another option is to negotiate with your credit card company. You could potentially settle your debt for less than the full balance you owe.
The bank wants to foreclose your home
If you’ve fallen behind on your mortgage payments, you may want to consider filing for bankruptcy. The bank will issue an order for relief if you file for Chapter 13 or Chapter 7 bankruptcy. The order includes “automatic stay,” which ceases collection for creditors. Filing for bankruptcy, in this case, can buy you some time. While the bankruptcy is pending, the foreclosure sale will be legally postponed.