Do You Need to File Bankruptcy? 5 Signs to Consider

Whether you should file bankruptcy is a important question, but here are some of the warning signs that you should consider. First, remember that there are no minimum debt amounts required to file a case. There are maximum debt limits in Chapter 13 cases, but I don’t often find folks in those situations.

Here are some of the warning signs however:
1) if you’re being sued by a creditor, particularly a credit card company or a car lender following a repossession, then you should think about bankruptcy. It might be your quickest and easiest solution. If you lose a lawsuit, then that judgment may become a lien on any real estate that you own, and the creditor can also garnish your bank accounts. Bankruptcy can stop any lawsuits immediately. If the judgment has already been entered, then a bankruptcy can often eliminate the judgment as well;
2) if you’re facing a mortgage foreclosure or auto repossession. Here, you can file an immediate Chapter 13 case and repay your arrears over a 5 year period.  Be very careful about waiting to receive a mortgage modification agreement from your mortgage company.  You have no legal right to a modification.  Filing a Chapter 13 bankruptcy is invariably the surest way to stop the foreclosure;
3) if you’re being harassed by creditors. If you’re getting a lot of phone calls, yes, you can stop answering your phone, but many creditors then start calling your neighbors or your employer. The automatic stay in any bankruptcy case stops creditor calls immediately;
4) if you’re underwater with a second mortgage, you can file a Chapter 13 bankruptcy to “strip down” a second mortgage. This is a complicated subject, but one worth considering to get rid of a home equity loan to save your house;
5) if you can’t work out arrangements with your creditors, sometimes bankruptcy is simply the best option. With a bankruptcy filing, you can stop the IRS or even student loan companies from pursuing you. So a Chapter 13 payment plan can work in those scenarios as well.

If you find yourself in any of these situations, call my office for a free consultation.

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