Do you have a debt problem?
If you are trying to decide if Bankruptcy is for you, the first thing you need to analyze is whether or not you have a debt problem that calls for professional help. You probably do not need bankruptcy if you are slowly but surely paying down your debt, and will have it paid off in less than a year. But sometimes the debt is out of control: The balances have gotten too high, you are unemployed, you are sick, there are old judgments against you, etc. Below are some indications that you need help:
Signs that you should Consider Bankruptcy:
- The amount of Credit Card Debt that you have will never be paid off by you in a reasonable amount of time (a lot of times because of penalties and high interest, and a failure of the credit card company to work with you).
- You have thousands of dollars of medical bills that you cannot pay. Medical Debt is one of the leading causes of Bankruptcy. Even if you have health insurance, you can still get suck with tons of medical bills that do not get covered. If you do not pay these bills, they get sold to debt buyers and collection agencies. These lovely companies then put the debts on your credit report, and make other attempts to collect the debt from you (phone calls, collection letters, and lawsuits).
- You are being harassed. When you owe creditors money, they do not forget. They send you collection letters that try in every possible way to coerce money out of you. But even worse than that, they call you. Phone harassment by creditors that you cannot pay causes a lot stress, especially if they start calling you at work. Bankruptcy stops these calls immediately upon filing your case.
- You are being sued. Every week in the Unites States, thousands of debt collection lawsuits are filed by creditors against debtors. Many are credit card companies suing their customers who cannot pay. A Bankruptcy filing stops the lawsuit in its tracks, and usually gets rid of it all together. Whatever you do, do not let the lawsuit become a judgment.
- Your Credit Report is in bad shape. Just because you have a low credit score does not mean you have to file for Bankruptcy. But if your score is low because of a lot of delinquent debt (car repos, medical debt, collections, foreclosures, credit cards), then a Bankruptcy can help clean it up. The Bankruptcy will remove the debt, and you can begin re-building your credit immediately.
- You are a down-and-out Real Estate investor, realtor, mortgage broker, loan officer, etc. Recently, the entire real estate industry has taken a hit. Many real estate investors now have negative equity in many properties and have to walk away from them. Bankruptcy can be a good option because it discharges mortgage debt, whether it is before or after a foreclosure. It is usually a lot quicker than a short sale.
- Your business failed. The most successful business people in America have business failures in their past (that is how you learn). Many of them obtained a Fresh Start by using the bankruptcy system, before they went on to become millionaires. When your business fails, you probably personally guaranteed the business debts, which makes you liable on them. A personal Bankruptcy can clear these debts. Also, if you can show that 51% or more of your debts are business related, you may not even have to do the Means Test in a Chapter 7 (you automatically qualify).
- You co-signed a loan or lease for someone who failed to pay. Co-signing things for friends and family is always dangerous. If they fail to pay, the creditor comes after you. A bankruptcy clears your liability on those debts.
- You are in foreclosure and want to save your house. A Chapter 13 Bankruptcy will stop a foreclosure and allow you time to workout payment arrangements with the mortgage lender.
Do you have Bankruptcy Alternatives?
Once you have recognized that you have a serious debt problem, you should then look at all your options. Can you pay the debt in a reasonable amount of time, without liquidating your retirement plans or other essential (and usually exempt) assets? Can you settle the debt? This can be done if you have a chunk of change to offer a creditor to settle for less than what is owed. Or you can use a Debt Settlement company, which is not usually recommended by this website. Debt Settlement companies charge you a fee to try to settle your accounts, but there are no guarantees, and there are no refunds if they fail. Another option, Debt Consolidation, just means getting a new loan to pay off (or “consolidate”) your other loans. This usually leaves you in the same position, because you still owe the same amount of debt.
Bankruptcy is usually your Best Option – Talk to a Bankruptcy Attorney
For most people in financial trouble, the alternatives discussed above do not offer a viable solution. A Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is usually the best option to solve your debt problem. This is because Bankruptcy is powerful. A Bankruptcy case is a Federal court case, which means Federal Law will stand between you and the creditors, protecting you from them. If the creditors violate your bankruptcy, you can use other Federal laws to enforce your Bankruptcy Rights against them (usually by suing them). Only Bankruptcy offers you these benefits. And of course, you should always discuss all your options with a Bankruptcy Lawyer or Bankruptcy Attorney.