Bankruptcy can be a pretty scary term. It often carries the connotation of total financial ruin, although that’s usually not the case. In many instances, bankruptcy can be what saves you from total financial ruin and helps you to get back on your feet.
“When somebody really doesn’t have money to pay their bills then they should claim bankruptcy and face it right on and start all over again,” says Suze Orman of The Suze Orman Show. “Many gripe when I tell someone to claim bankruptcy. But what if you’ve got all this credit card debt, mortgage debt and car loans, and you just stop paying all these things because you just don’t have the money?”
Orman offers advice that many financial advisers and attorneys would offer in the wake of serious financial difficulties. Although you should explore all your options before filing a bankruptcy claim, it’s one that should be seriously considered if you’re experiencing any of the following financial struggles.
- Your Personal Assets Are At Risk
If you find yourself so far behind on your house, auto, or other loan payments that you’re facing repossession, bankruptcy might be your best option. By using a Chapter 13 filing, you can create a plan for repaying delinquent debts while keeping possession of your assets. As long as you stick to the new repayment plan, you should be able to stave off foreclosure or repossession of your personal assets.
- You’re Facing a Long-Term Cash Flow Crisis
Cash flow problems in personal finances are more common than you might realize. You may have been laid off with no viable job prospects in sight, gone through a nasty divorce that left you without an income, been put on disability, or have outstanding medical bills for a serious medical issue.
Any of these conditions can create serious cash flow problems. If a stricter budget and more self-discipline simply won’t make ends meet, bankruptcy can help you gain control of your financial obligations until you can resolve your cash flow problems.
- Your Wages Are Being Garnished
Wage garnishment occurs when creditors take a portion of your paycheck directly from your employer in order to cover a debt. Wage garnishment is a more common issue than you might realize. According to an ADP Research Institute report, 7.2 percent of U.S. workers will face wage garnishment in order to pay their debts.
You have rights when it comes to wage garnishment, and it’s important that you do everything you can to protect your financial investments. However, if it comes down to it, a bankruptcy filing can provide an automatic stay, as long as you’re not trying to use it to prevent garnishment for domestic support obligations like alimony or child support.
- You Have Several Bills in Default
If you really look at your finances, you might be surprised how many bills you’ve been unable to pay. When your mailbox is overflowing with overdue bills, consider financial counseling to see if there’s a way to refinance or cover your defaulted bills. If you simply don’t have enough income to cover your payments, your financial adviser might recommend bankruptcy as the best next step.
“The biggest plus of a bankruptcy is that it will dismiss most of your unsecured debts,” explains Samantha Seiffert of National Debt Relief. “This means it will eliminate all your credit card debts, medical bills, and personal loans. The idea behind a chapter 7 is to give you a ‘fresh start.’ If you have a lot of unsecured debts, it will do just that.”
- Your Credit Cards Are Maxed and Your Savings Gone
When you’re struggling with cash flow, no matter the reason, it’s not uncommon to blow through your savings and rely on credit cards to pay your bills. This can provide some temporary relief while working on rectifying the cash flow problem, but if there’s no solution to getting more money anytime soon, it will only make your debt repayment problems worse.
- You’re Taking Out Loans to Pay Off Bills
Taking out personal loans is another common solution when cash is short, but it’s not always the best one. Personal loans come with high-interest rates and inflexible repayment demands. If you’re sure that you can repay the loan before it comes due, this can be a good way to control your finances. But if there’s no money in the future to cover the money you borrowed, it’s often better to look into bankruptcy options instead.
- Debt Collectors Are Pursuing You
Your creditors will come after you when you default on your loans, often threatening to take legal action if the debt is not paid by a certain date. “If creditors sue and win they have the legal authority to garnish wages or put liens on your home,” says Suze Orman. Suddenly, your financial stress becomes even more difficult.
Orman recommends that you “take the legal route that is claiming bankruptcy, to let your creditors know that you really can’t afford to pay it.” You’ll be able to put a stay on their collections and avoid further financial problems.
- You Have a Solid Plan for the Future
By now, you’ve probably recognized some of the benefits of declaring bankruptcy for greater financial freedom. However, it’s not always a cure-all, and it certainly isn’t helpful if you’re going to wind up where you started again.
“The most important thing is to understand that filing for bankruptcy is a process, not an event,” says an article from The Joy of Bankruptcy. “What you do before, during, and after the actual filing will affect your future, as well as the success of the bankruptcy itself. By success, I mean accomplishing the goal of giving you a new financial start.”
Before filing for bankruptcy, know where you’re heading financially. Make it a real fresh start, and ensure you won’t fall back into the same bad habits and issues that put you on the road to bankruptcy in the first place. Talk with your attorney and financial adviser about the right steps to take for a successful personal bankruptcy filing.
Contact Rowdy G. Williams Today!
When you see that all signs are pointing to bankruptcy in your personal finances, seeking appropriate legal counsel is one of the most important steps you can take. The attorneys at Rowdy G. Williams law firm understand the inner workings of bankruptcy and debt relief. We’ll help you explore all of your options and know when it’s time to file for bankruptcy.
For more information about your options and how we can help, contact us today!