[COLUMN] Does filing bankruptcy make sense for your situation?

NO one ever likes to talk about bankruptcy. However, it’s simply a fact of life. Things happen. Whether it’s losing your job, going through a divorce, having huge medical bills that you can’t pay – or sometimes simply making poor financial decisions- any of these can lead to bankruptcy. It’s a scary thing to a lot of people and most never imagine that it could ever happen to them.

But like everything else in life, fear often comes from a lack of understanding. Most people have heard negative things about bankruptcy so they try to stay away from it the best they can- until one day they realize that it’s the only option they have left. Understanding that bankruptcy is not the end of the world and that it is simply a chance for you to start over can be helpful if you ever find yourself in such. Under what circumstances is bankruptcy advisable? Well, cases vary, but let me mention a few examples.

  1. When there is no other way out of debt

Some people are so buried in debt that unless they file bankruptcy, they will simply remain in debt until hell freezes over. This is especially true for people who owe large amounts of credit card debt. As you already know, credit card companies usually charge anywhere from 18-29% in interest and paying only the minimum required every month guarantees that you will never pay off what you owe. If your credit card accounts are now seriously delinquent and you’ve been sued by creditors or about to be sued, filing bankruptcy may be the only way for you to either wipe out or consolidate your debts.

  1. When creditors have taken you to court

Creditors will often harass you for months, making you feel like a deadbeat and a criminal, to force you to pay. But sooner or later, they will bring a lawsuit so they can obtain a judgment against you. Once they have a judgment, they can enforce the judgment by several ways- going to your employer to garnish your wages, levy your bank account or place a lien on your home or other real property. Unless you can work out a reasonable settlement with creditors to avoid  the above, you may be forced to file bankruptcy in order to protect yourself and your assets. Filing for bankruptcy protection immediately stops all legal proceedings against you and your property. Even the IRS (a government agency that you don’t want to mess with), who has more powers than ordinary creditors, cannot continue to collect from you once you are in bankruptcy. Unpaid tax liabilities can either be discharged in bankruptcy or be paid back with no interest and additional penalties.

  1. If your home or other property is in or under threat of foreclosure

Bankruptcy immediately halts foreclosure proceedings. If a Notice of Default or a Notice of Trustee Sale has been filed by your lender, you have very limited time to protect your property so you must act quickly. Chapter 13 may be an option for you if you have regular income and you can afford to continue making mortgage payments. All back mortgage payments are combined with other debts and can be paid back under a 5-year plan. In certain cases, you may even be able to wipe out debt owed under a second mortgage (lien stripping) or significantly reduce the amount owed. If mortgage payments are too high, modifying the first mortgage and then “stripping off” the second mortgage may be your best strategy in making your home more affordable.

Bankruptcy can be a tool for financial recovery. Don’t be discouraged. There is hope for you and it could be the only way for you to put your finances back in order.

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NOTE: Due to the pandemic, consultations via phone or video are available. Please call the office at 866-477-7772 to schedule your appointment with me. Questions? Email me at [email protected].

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None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772.

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