Anyone who feels in over their head in credit card debt, medical bills, or other loans may wonder if filing for bankruptcy is the only way out of this financial predicament. Filing for bankruptcy is not something a person should decide upon lightly and may consult with a lawyer about their options and long-term impacts to consider. Taking this route does not always lead to the entirety of debts being eliminated. In fact, some people may have to still pay off at least a portion of their debts depending on which bankruptcy chapter they have to operate under. Here we have shared four major signs that it may be time to seriously think about applying for bankruptcy:
#1 You Are Being Sued
If you fail to make your payments on time, eventually it may get forwarded to a collection agency. If a debt collector tries to continuously call and send letters without an answer, they may choose to file a lawsuit against you as a way to force paying. Trying to fight a debt collection lawsuit can be immensely difficult, and if you don’t win the case you may have to pay even more due to court fees.
By filing for bankruptcy, it provides you with some legal protection from debt collection agencies. Once you have filed your petition for bankruptcy, the court issues an automatic stay to your creditors. Essentially, what this means is your creditors are no longer able to contact you to request payment collection.
#2 Your Wages are Garnished
A creditor may request a court order to garnish money from your wages. Your employer is then required to take out a specific amount of money from your earnings before it even arrives into your hands. An employer may have to repeatedly garnish money from you with each paycheck until the debt has been fully paid off. After filing for bankruptcy, you are protected by automatic stay, which halts the garnishment and provide quick relief from financial strain. However, garnishments related to child support or spousal support are an exception and may still be removed from earnings.
#3 You May Lose Your Home
Those who are at risk for losing their home due to foreclosure may use bankruptcy as a way to get caught up on payments and continue owning the home. This may not only affect you but your partner or children if you have a family. If you file for Chapter 13 bankruptcy, you can keep your home and other assets, but you will have to abide by a repayment plan over the court of 3-5 years.
#4 You Cannot Keep Up with Bills
If you have to keep running your credit cards as a way to cover bills, you may find yourself eventually buried in so much debt that you cannot recover on your own. Then, if you endure a layoff or unanticipated illness/injury, keeping up with bills may feel impossible. If your debts vastly exceed your earnings and you don’t have enough money at the end of each month to pay for living necessities, it may be time to consider how filing for bankruptcy can assist you.