One of the most common questions asked by potential bankruptcy filers is, “What can bankruptcy do for me?” Bankruptcy is an important financial decision and whether or not it’s the right choice for you will depend on your financial situation and your debts. Keep in mind, bankruptcy does not discharge all types of unsecured debts so it’s important to talk to a bankruptcy lawyer BEFORE you file bankruptcy.
What can Bankruptcy do for me?
- Bankruptcy allows many debtors to get a fresh start by discharging certain unsecured debts such as credit cards, medical bills, and unsecured personal loans.
- Bankruptcy may allow you to stop a home foreclosure. It will not guarantee that you will be able to keep your home, but it may allow you to catch up on missed payments and restructure your remaining payments.
- Bankruptcy can often stop repossession of certain types of secured property such as a car.
- Bankruptcy can stop certain types of wage garnishments and other harassing creditor actions.
- It may allow you to stop or prevent termination of your utility services.
- It may allow you to eliminate deficiency balances if your property is repossessed. For instance, if your house has been foreclosed and sold at auction but you were upside down on your mortgage chapter 13 may allow you to eliminate the balance of the remaining debt, although you would no longer have possession of the property.
As mentioned above, bankruptcy is not the right choice for everyone. For instance, if you have secured debts or unsecured debts which are not generally discharged (unpaid state or federal taxes, school loans, child or spousal support payments, criminal fines, court restitution orders) bankruptcy may not be your best choice.
How do I know if it’s the right time to file bankruptcy?
Filing bankruptcy should only be done after you have exhausted all other avenues to repay your debts. For instance, if you are behind on your mortgage payments or credit card payments it is best to talk to your creditors and find out if they are willing to work with you. If you tell them you are considering bankruptcy they may realize that getting some payment may be better than none and negotiate with you.
Some debtors also want to file bankruptcy but they have very low debt amounts. If you owe less than $10,000 bankruptcy is probably not a good choice for you. Consider, the cost of filing can be quite high, especially if you hire a lawyer and the filing will remain on your credit report for 7 to 10 years making it difficult to get credit at a good interest rate.
Hiring a bankruptcy lawyer
Not everyone will need a bankruptcy lawyer, especially if you have no possessions and you are completing a simple chapter 7 bankruptcy case. But if you have property you want to keep or need help creating a repayment plan a bankruptcy lawyer can help.