I am often asked the following questions: When does it make sense to file for bankruptcy? How much do I have to owe to justify filing for bankruptcy and have that on my credit report? My answer to these questions is always the same: Whether or not bankruptcy is advisable for your situation will depend on your specific circumstances, the types of debts you owe, and the intended purpose of filing. People come to me for bankruptcy advice for a variety of reasons. Below are 3 of the most common:
- Credit card debt is out of control and bankruptcy is the only way out: Many times, for whatever reason, credit card debt has simply gotten out of control and the person sitting across from my desk is very distraught 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 cards as if they were spending their own money, not realizing that the money actually belongs to the bank and is not theirs. This is the Las Vegas mindset that gambling casino chips doesn’t feel like gambling with cash, so it’s easier to use credit cards when buying things instead of withdrawing cash from your bank and using cash for your purchases.
On the other hand, I realize that other people simply have no choice but to resort to using credit cards strictly to survive because income is always meager and they never have enough money to pay their bills every month. To make ends meet, many people are tempted to use their credit cards to pay monthly living expenses in the hope that they can be paid “once they catch up” with other bills. The problem is that that day never comes and the debts keep piling up.
- To prevent creditors from taking or garnishing property– Once a creditor takes forcible collection action and obtains a judgment against you for an unpaid debt, the creditor can garnish your bank accounts, garnish your wages, or place a lien on your property. If you fall behind on your mortgage payment, he may lose his property in foreclosure. Your car can be repossessed if you are behind on your monthly payments and the car can be sold at auction, after which you may be liable for a deficiency. I am often perplexed as to why many people who already know they may be facing one of the above still wait until the last minute before doing anything about their situation. If appropriate for your situation, bankruptcy can immediately stop collection action against you and/or your property and you can save yourself the humiliation of receiving a wage garnishment order from creditors at your workplace. Keep your financial affairs private by acting immediately before things get ugly. If you are facing foreclosure, don’t listen to advice from people (friends or family members) who think they understand the legal aspects of your situation. They may mean well and be willing to help, but there is no substitute for a legal professional who can recommend possible options.
- Minimum payments are being made on credit cards, but the outrageous interest rates charged by credit card companies guarantee that your debts will never be paid, at least not in this lifetime: You may owe so much on your credit cards that it takes more than a lifetime to pay off what you owe. Some people seem to think that as long as they can make the minimum payments on their credit cards, they should be “just fine.” One day they decide to take a closer look at their credit card statements and realize they still owe the same amount they owed 3-6 years ago. Like clockwork, they have paid their bills on time and worked long hours just to preserve their creditworthiness. Finally, when reality hits them in the face, they realize that they have become slaves to their creditors for life and begin to feel trapped in their situation.
Filing for bankruptcy, of course, is a serious decision that should never be taken lightly. You must weigh the advantages against the disadvantages. I see many cases where it is better for a person to file for bankruptcy from time to time and then start rebuilding their credit after having a fresh financial start. Since many people in debt already have a less-than-perfect credit rating anyway, from a lender’s point of view, they would rather see a bankruptcy on a credit report and be debt-free than see large amounts of unpaid debt, accounts collection, trials. and trials. If your bankruptcy is 3 years old, you may still qualify to purchase a home with some restored credit if all other credit characteristics are appropriate. Filing for bankruptcy is a beginning, not the end.
If you’re considering filing for bankruptcy but are confused about your options, I’d 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 pandemic safety concerns, I am offering free PHONE consultations to anyone who needs help dealing with their debt problems.
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No part of the information contained in this document is intended to provide legal advice for any specific situation. Attorney Ray J. Bulaon has successfully helped over 6,000 clients get out of debt. For a free evaluation of his situation by an attorney, call the Law Offices of RJB TOLL FREE 1-866-477-7772.