People have financial difficulties for all kinds of reasons. However, there are some common scenarios in which bankruptcy can be the most effective solution to start over with a clean financial slate. If you find yourself in one of the following situations, consulting an attorney at a bankruptcy law firm can help you understand your options and give you tools to move toward financial stability.
Unmanageable Credit Card Debt
Credit card debt is one of the most common reasons people file for bankruptcy in the United States. Although credit card companies gladly extend liberal amounts of credit, if you’re unable to make at least the monthly minimum payment, they will not hesitate to take action to collect what they are owed. Consequences vary, but failing to pay your credit card bills can result in extra fees being added, higher interest rates, collection actions, and even lawsuits. It can also put a serious ding on your credit score, which can keep you from qualifying for a car loan, mortgage, and other credit cards.
Chapter 7 bankruptcy is often the most effective solution for wiping out credit card debt and other unsecured debts. Individuals and certain types of businesses may file for Chapter 7. If you file for Chapter 13 bankruptcy, you will have to pay back a portion of your credit card debt through your repayment plan, but it will likely be much less than what you owed before you filed for bankruptcy.
If you are thinking of filing bankruptcy for business debts, it is important to keep in mind that in Chapter 7 bankruptcy, your business assets will be liquidated to pay your debts. If you want to remain in business and avoid liquidation, Chapter 11 bankruptcy is probably a better solution. Before making this critical decision, it is crucial to seek the advice of an experienced business lawyer in West Chester.
Mortgage Debt and Risk of Foreclosure
Circumstances in life change, and unfortunately a job loss or other financial woes can keep you from being able to afford mortgage payments. Although many people believe that they will lose their home if they file Chapter 7 bankruptcy, this is not always the case. Federal and state bankruptcy exemptions can help you retain some or most of your assets when filing Chapter 7 bankruptcy. The equity you have built in your home and whether or not you are able to catch up on payments are factors to consider when deciding which type of bankruptcy to file.
However, if you’re significantly behind or payments or your home is already in foreclosure, filing Chapter 13 may be a better solution if you want to keep it, as it allows you to catch up on payments through your repayment plan of 3-5 years.
Regardless of which type of bankruptcy you choose, an automatic stay is put on your debts as soon as you file. The automatic stay halts most forms of collection activity, including foreclosure, repossession, wage garnishment, and collection calls and correspondence. A bankruptcy lawyer and attorney for contract review can take a look at the terms of your mortgage and advise you of your options.
Overwhelming Medical Bills
Unfortunately, exorbitant medical debt is a serious problem for many Americans. As unsecured debt, medical bills are completely wiped out in Chapter 7, although some of your assets may be sold to pay a portion or all of it. In Chapter 13, your medical debt is included in your repayment plan. In most cases, medical debt can be significantly reduced or eliminated depending on how much you can pay off by the time your repayment plan is completed.
If you’re facing financial hardship, Carosella & Associates can help you find solutions to get back on track. Our experienced team of business succession planning attorneys, lawyers for wills and trusts, and bankruptcy attorneys provides large firm firepower with personalized small firm service.