If you are in debt, you may be wondering whether to file bankruptcy. Choosing to file bankruptcy or not isn't easy. This is the reason you should seek the counsel of a bankruptcy attorney. Here are some reasons you may consider filing for bankruptcy.
Wiping Out Some Debts and Getting More Time for Debt Repayment
When choosing whether or not to file for bankruptcy, you should set goals. For some people, bankruptcy is a way of eliminating debt. However, some debts cannot be discharged by filing bankruptcy. For example, bankruptcy cannot eliminate domestic obligations like spousal and child support. But you can discharge medical bills, credit card obligations, and personal loans.
If you aim to discharge all of your debts, then bankruptcy may not be an appropriate solution. Some people file for bankruptcy to get more time to pay off debts. In this case, you can file for Chapter 13 bankruptcy, which allows you to pay off your debts over a 3–5-year period.
To Avoid Foreclosure or Repossession of Your Property
You will gain more if you file for bankruptcy before foreclosure. This will prevent your lender from seeking a deficiency judgment. If your lender was to get a deficiency judgment, they might be able to collect from you through different techniques. For example, your employer may deduct money from your salary. This is called wage garnishment. The court may also issue an order that forces your bank to deduct money from your account, also known as a bank levy.
When you file for bankruptcy, you get an automatic stay that temporarily stops foreclosure. In the case of chapter 7 bankruptcy, you can agree on a repayment plan with your lender. Alternatively, you can file chapter 13 bankruptcy for restructured mortgage payments.
You Are Going to Be Promoted
Maybe you want to get an extension for paying your loans or want to discharge some of your debt, but you expect to earn more in the future. In this case, you should file for bankruptcy before you start earning more money. To qualify for Chapter 7 bankruptcy, you should pass the mean test.
This test examines your average earnings over a six-month period. The higher your income, the less likely you will pass the mean test. However, you may still qualify for Chapter 13 bankruptcy if your income is high. Consult your bankruptcy attorney on how high income affects your bankruptcy case.
