If you are thinking about filing bankruptcy, you are probably struggling to pay your debts and are wondering if “filing bankruptcy is a good decision?” Filing bankruptcy can give you room to breathe and help get you out of a financial disaster.
If you do a quick online search you will find a lot of misinformation about filing bankruptcy. You may read that if you file bankruptcy, your life will be ruined forever and you will never get credit again. Fortunately, this is far from true. Filing bankruptcy can help you start your life anew. Bankruptcy laws were created for individuals that fell into an unfortunate circumstance. Bankruptcy allows individuals facing medical debt, divorce, job loss, garnishment, and foreclosures a way to get out of debt and start over.
Inherently, bankruptcy isn’t good or bad. Bankruptcy is an important decision that only you can make. Filing bankruptcy can provide you with protection if you are having trouble paying your creditors.
When To Consider Filing Bankruptcy
Filing bankruptcy may not be a good solution for everyone, if you only have $1,000 worth of debt, it probably wouldn’t make sense to file bankruptcy. The only way to know if filing bankruptcy should be something to consider is by reviewing your individual finances. Ask yourself, if you will be able to pay your credit card debt off within two years or less.
The best way to determine if you should consider filing for bankruptcy is to run some numbers. Take your credit card debt and divide it over 24 months (two years). Ask yourself if you have a steady income to be able to pay this debt off every month? Ask yourself if you can realistically afford all of your basic living needs if you continue to pay this debt? If not, do you want to risk struggling to pay your debt off?
Individuals who live paycheck to paycheck often don’t account for emergencies. When an emergency happens, they usually charge on their card putting themselves deeper into debt. If you have high balances left over each month, the cost of interest alone can be unmanageable. As credit card companies continue to charge interest you may notice that the amount you owe isn’t really going down.
Keep in mind, late payments have a negative impact on your credit score. Every time you make a late payment, it will stay on your report for up to 7 years. This can cause a big drop in your credit score.
You may be wondering why I suggested calculating numbers based on a two-year timeline when you file bankruptcy you can have perfect credit within two years. If you can realistically pay off this debt in two years then you may not need to file bankruptcy.
Is Filing Bankruptcy Worth The Cost?
If you are already strapped for cash the cost of filing bankruptcy with a lawyer may alarm you. Before turning away from bankruptcy because of cost, you should compare your total debt with the cost of filing bankruptcy. Below are the typical costs associated with filing a bankruptcy
- Filing Fee $335
- Bankruptcy lawyer fee (between $1,500-$5,000)
- Credit Counseling Court (Between $10-$50)
If your only debt is $2,000 then filing bankruptcy may not be worth it. If you have a job and can pay this debt off then you may be able to negotiate this debt with your creditor. On the other hand, if your debt is $10,000-$20,000 paying $1,500- $2,400 to file bankruptcy is probably worth it.
One of the biggest misconceptions about bankruptcy is that it will ruin your credit forever, bankruptcy isn’t what it used to be. Most creditors will only look at your credit score when deciding to extend credit. Most of our clients are able to get a credit card immediately after they get their bankruptcy discharge. In fact, many clients have gotten new car loans within 6 months of filing bankruptcy. Even some who have filed bankruptcy more than once are able to get credit immediately after their bankruptcy case is over.
Can Bankruptcy Save My Home From Foreclosure?
If you are imminently facing foreclosure, bankruptcy is probably the best way to keep your home. As soon as you file bankruptcy, lenders must stop foreclosure proceedings. Bankruptcy can allow you to save your home. If you are behind on your mortgage, you may be able to catch up on payments. By filing bankruptcy you can halt the sale of a home the same day.
Depending on which chapter of bankruptcy you file, you may be able to catch up on past due mortgage payments. Bankruptcy Court provides different ways for debtors and lenders to work together. One of those ways is by applying for a loan modification.
Speaking with a bankruptcy lawyer is extremely important if you are worried about losing your home.
Can Bankruptcy Stop a Lawsuit by a Creditor?
If you have been personally sued by a creditor, you may need to act fast. If you choose to ignore the lawsuit, creditors will be able to sue and garnish your wages in as little as 45 days.
The worst mistake you can make is not answering these lawsuits. If you have been served papers by a creditor call a bankruptcy lawyer to help you. They can determine how you should answer and what your next steps are. By not answering you are risking having your bank accounts levied and your wages garnished.
A wage garnishment allows creditors to take money directly from your paycheck each month. The creditor will contact your employer and let them know that a portion of your check needs to go to them. Most people are embarrassed to have creditors contacting their place of employment. This is why it is important to speak with someone who can help you immediately.
Once a creditor gets a judgment, your bank account will be levied. When creditors levy upon a bank account, only money can go into the account and money won’t be allowed to be taken out. When a creditor levies on a bank account they will take any money that is in there. Creditors can find out which institutions you bank at fairly quickly. Once they notify your bank, the bank will freeze your account until the levy is removed.
If you are on a joint bank account with someone else the other person can be impacted by a bank levy. Yes, creditors can levy upon any bank account that is attached to your social security money. Even if you claim that the money in the account is not yours, creditors will assume it is since your name is on it.
What Types Of Debt Are Discharged in Bankruptcy
Bankruptcy is able to eliminate most debts. If you are unsure which of your debts can be discharged, you should review your credit report and determine what types of debts you have. Debts that can be eliminated in bankruptcy are:
- Credit Card Debt
- Medical Debt
- Personal Loans
- Some Tax Debt
- Pay Day Loans
- Deficiency Judgments
- Landlord-Tenant Judgments
- Evictions
- Phone & Utility Bills
Tax debt can be discharged as long as your taxes were filed on time and the debt is three years or older. Most student loans can’t be discharged in bankruptcy. If you are struggling to pay your student loans and they are private ones, you may be able to negotiate with them. Bankruptcy can also help defer your monthly student loan payments, allowing you time to catch up.
When to Seek Bankruptcy Help
Struggling with debt can be embarrassing and stressful. Most individuals who find themselves in a bad financial position may be embarrassed to seek the help they need. Bankruptcy lawyers speak with hundreds of clients who are in the same position as you. Most likely, your situation is nothing they haven’t heard before. We understand that not everything in life can be planned. If you feel ashamed or embarrassed about filing bankruptcy, you shouldn’t.
If you plan to seek help with filing your bankruptcy, find a lawyer whom you feel comfortable with and can trust. It is important to be open and honest with your bankruptcy lawyer so that they can guide you in the right direction.
If you are unsure if you want to file bankruptcy, at least sit-down and speak with a bankruptcy lawyer. Most bankruptcy lawyers give free consultations which you can learn a lot from.
If you want to learn more about filing bankruptcy and if it should be something to consider, contact us today. Our lawyers are ready to answer your questions. You can contact us by filling out the online form, emailing us at Karra@klkbankruptcylawyer.com or calling us at 973-979-9078. Our bankruptcy lawyers help people in New York and New Jersey file bankruptcy and get out of debt.