I AM has often asked the following questions: When does declaring bankruptcy make sense? How much do I owe to justify a bankruptcy filing and have it on my credit file? My answer to these questions is always the same: whether or not bankruptcy is advisable in your situation will depend on your particular circumstances, the types of debts you owe, and the purpose of filing. People come to me for bankruptcy advice for different reasons. Below are 3 of the most common:
- Credit card debt is out of control and bankruptcy is the only way out: Often, for whatever reason, credit card debt has simply gotten out of control and the person sitting across from my desk is seriously distressed and confused, not knowing what to do. Credit cards can be useful in times of financial emergency or for convenience. But they can also be terribly abused and misused. For example, some people use their credit card as if they were spending their own money, not realizing that the money actually belongs to the bank and it does not belong to them. It’s the Las Vegas mentality that betting casino chips isn’t like betting money, so it’s easier to use credit cards to buy things than to take money out of your bank and use the money for your purchases.
On the other hand, I realize that other people just have no choice but to resort to credit cards just for survival because income is always limited and they never have enough money to pay their bills each month. To make ends meet, many people are tempted to use their credit card to pay their monthly living expenses in hopes of being able to pay them back “when caught up” with other bills. The problem is that day never comes and the debts keep piling up.
- Prevent creditors from seizing or seizing property– Once a creditor pursues an enforcement action and obtains a judgment against you for an unpaid debt, the creditor may debit your bank accounts, garnish your wages, or place a lien on your assets. If you are late in paying your mortgage, you risk losing your property to foreclosure. Your car may be repossessed if you are behind on your monthly payments and the car may be auctioned off, after which you may be liable for impairment. I am often puzzled as to why many people who already know that they may be facing any of the above issues still wait until the last minute before doing anything about their situation. If it suits your situation, bankruptcy can immediately stop collection actions against you and/or your assets and you can save yourself the humiliation of being served with a wage garnishment order by creditors in your place of residence. work. Keep your financial affairs private by taking immediate action before things go wrong. If you are facing foreclosure, do not listen to advice from people (friends or relatives) who think they understand the legal aspects of your situation. They may have good intentions and are willing to help, but there is no substitute for a legal professional who can recommend possible options.
- Minimum payments are made on credit cards, but the exorbitant interest rates charged by credit card companies ensure that your debts will never be paid off, at least not in this lifetime: You may owe so much on your credit cards that it will take you more than a lifetime to pay off what you owe. Some people seem to think that as long as they are able to make the minimum payments on their credit cards, they have to go “OK”. One day, they decide to take a closer look at their credit card statements and realize that they still owe the same amount as they did 3-6 years ago. Like clockwork, they paid their bills on time and worked long hours just to preserve their solvency. Eventually, when reality hits them in the face, they realize that they have become slaves to their creditors for life and they begin to feel trapped in their situation.
Filing for bankruptcy, of course, is a serious decision that should never be taken lightly. You should weigh the pros against the cons. I see a lot of cases where a person is actually better off declaring bankruptcy once in a while and then starting to rebuild their credit after getting a financial fresh start. Since many people in debt already have a less than perfect credit rating anyway, from a lender’s perspective they would rather see bankruptcy on a credit report and no debt than seeing huge amounts unpaid debts, collection accounts, lawsuits and judgments. If it’s been 3 years since your bankruptcy, you may still qualify to buy a home with restored credit if all other credit characteristics are appropriate. Filing for bankruptcy is a beginning, not the end.
If you are considering bankruptcy but are unsure of your options, I would be more than happy to assess your situation, free of charge. Call our office toll free at 1-866-477-7772 to schedule a free consultation with an attorney. Due to security concerns related to the pandemic, I am offering free consultations OVER THE PHONE to anyone who needs help dealing with their debt issues.
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None of the information contained herein is intended to provide legal advice for any specific situation. Atti. Ray J. Bulaon has successfully helped over 6,000 clients get out of debt. For a free evaluation of your situation by an attorney, please call RJB Law Firms toll-free at 1-866-477-7772.