How do you know if you should file bankruptcy?

By Jim Ince

Is bankruptcy an option you should consider, or is it something that would do more harm than good? This is sometimes a difficult question. However, I have found that when people ask the question, they are often already past the point of needing the help of a bankruptcy service.

To assist you in attempting to answer this question, I will go through a couple of scenarios that often lead to bankruptcy.

  • Behind on the cars or the house: This is a huge red flag. If you are not keeping up with payments on the major purchases in your financial portfolio, you are in serious trouble. Prioritization is very important. The credit card companies make the most noise and are often the most persistent in their collections. People will often pay them just to get the calls to stop. However, the reason the car and house creditors do not constantly call is that they can just simply take back the collateral (the car or house).
  • You have gotten a foreclosure notice from a law office: It is time to file for bankruptcy, no “ifs,” “ands” or “buts.” Once your mortgage company turns your property over for foreclosure, it has stopped talking. The company may “talk,” but not seriously. Time and time again I have seen a situation where the mortgage company was working with the client right up to the day before foreclosure. At that point, the company notifies the client that it cannot help them. If you are not careful, the house will be foreclosed on right out from under you.
  • You have gotten a levy notice from the IRS or Student Loan Company: As with the foreclosure, it is time to file. Those creditors have no incentive to talk with you. While it is true that taxes and student loans cannot be discharged in a bankruptcy, they can be paid back on a less severe scale through a Chapter 13 bankruptcy, or the levy can be removed in a Chapter 7 bankruptcy, which will clear enough of your other debt to allow you to make payment arrangements on the student loan or IRS debt.
  • I have been sued: There is nothing much to do here except to file for bankruptcy. Your friends will tell you to make an offer. What they don’t understand is that if you could have made an offer, you would never have been sued.
  • The phone calls won’t stop; I cannot sleep at night; it is affecting my health; all I do is think about our debt: These are the most overlooked factors and the ones that are the most important. From a legal point of view, these factors don’t matter. However, from a human perspective they are critical. You are no good to yourself or your family if you are making yourself sick over your situation. This is not a situation that automatically means you must file for bankruptcy. However, it is the one that is the most individual. Frankly, there are people who can ignore the phone calls and letters and are willing to risk being sued. There are others who cannot stand even one phone call. You need to determine where you fall on this spectrum. It is my experience that with married couples, one of the spouses can take the “heat” while the other cannot. Don’t ignore the wishes of the stressed spouse. I cannot tell you how many people we have served at Bailey & Galyen after a major health crises such as a heart attack. It is better to deal with the situation before something like that happens.

Still not certain what to do? The best approach is to come to our office for a no-obligation FREE consultation. It may be that bankruptcy is not a good option for you. You won’t know until you ask. We are trained to deal with these situations. We understand the pain and suffering you are going though and we know you don’t want to even consider bankruptcy. Life dealt you these cards. How you play them is the key. Bankruptcy can be a way to start over.

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