Filing For Bankruptcy - When Is It The Right Choice?

There are many reasons why people may get overwhelmingly behind on their bills with little hope of catching up

. Whether due to a mistake somewhere along the way or circumstances beyond the individual or family's control, sometimes filing for bankruptcy is the best possible choice - but it is not a decision to be taken lightly.

When considering this important issue, keep in mind that there are two different types of filings. Chapter 7 is generally for people who don't have assets they need to protect, such as a house, or for those who don't have enough money to pay their current bills. Chapter 13, by contrast, can restructure past due debt to help people keep their house and car. However, it is only appropriate for those who can afford their current bills plus a little extra to get caught up on back payments over time. Only you and your lawyer can decide if either type is right for you, but here are some common reasons for bankruptcy filings.

1. Loss of employment. Those who lose their jobs may find it very difficult, if not impossible, to make ends meet. In the current economic climate, it can be challenging to find another job soon enough to keep all the bills caught up. When things fall hopelessly behind, it may be time to consider this incredibly difficult option.

2. High medical bills. Serious injury or illness can cause huge medical bills that the average family or individual won't be able to pay. When this happens, filing for Chapter 7 or 13 may be the only option to get relief from burdens of medical debt.

3. Death of wage earner. When one of the primary wage earners in a family passes away, bills that were perfectly manageable can suddenly become much too high for the family's diminished income. Bankruptcy can give those who are in this difficult situation the fresh financial start that they need.

4. Preventing foreclosure on a home. When a foreclosure is looming and can't be otherwise avoided, Chapter 13 can stop the process and help families and individuals keep their homes while restructuring debt to make catching up on late payments possible. Likewise, Chapter 13 will stop utilities from getting turned off.

5. Preventing a car or other assets from being repossessed. Chapter 13 bankruptcy also can restructure debt on a car or other possessions by consolidating late payments. This can allow those who are filing to keep their cars and other possessions.

6. Stopping wage garnishments. Wage garnishments can decrease a paycheck to the extent that it is hard to get by. Bankruptcy will halt most wage garnishments, with the exception of garnishments ordered by the court for child support.

It's important to remember that bankruptcy doesn't wipe out all debt (student loans, child support, and some taxes are examples of debt that will generally remain). Filing is extremely complicated, and bankruptcy laws vary from state to state. The consequences of a botched or ill-advised filing can haunt you for many years to come, so it's best to not attempt it by yourself.

Hiring a local lawyer who specializes in this sensitive issue is highly recommended to ensure that the filing is done correctly and that you and your assets are protected to the fullest extent of the law. Fortunately, many lawyers offer free consultations to help you decide whether either chapter 7 or 13 could be the right choice for you. Quite a few will submit your filing for a reasonable flat fee.

by: Stephen Daniels

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