November 21, 2018
Let me be clear: No one ever WANTS to file for bankruptcy. The same, however, may be said about surgery. There clearly are times when NOT filing for bankruptcy is worse than filing.
I would like to provide some instances in which people SHOULD file for bankruptcy as it is the best choice for debt relief and a Fresh Start.
First off, if your monthly bills exceed your monthly income, chances are you should file. Unless this is a short term issue, your first step is to make a budget by listing your monthly bills and your monthly income. If your bills exceed your income AND you don't foresee a rise in income or a reduction in bills, you should look into filing for bankruptcy.
Next, if you have been borrowing money from your retirement account, or plan to do so, consider bankruptcy first. Borrowing against such accounts results in hefty tax bills. Additionally, in a bankruptcy, retirement accounts are protected from your creditors. So the lesson is, if you have the desire to borrow from your retirement account, talk to a bankruptcy lawyer (and maybe a CPA) first.
If you are afraid to answer the phone or open your mail, there is a good chance that you would benefit from filing for bankruptcy. Bankruptcy stops these collection efforts and frequently allows you to discharge these debts. Creditors will start trying to collect from you inhouse, using their employees as debt collectors. After a few months, they will typically hire collection agencies to attempt to collect. These agencies can be very aggressive. If they are unsuccessful, the creditor can then file a collection lawsuit against you. Filing for bankruptcy stops this process in its tracks.
If you are facing certain legal actions against you or your property, you should immediately consult with a bankruptcy attorney. These actions include, collection lawsuits, repossession actions, foreclosure actions, garnishments, and bank account levies. Filing for bankruptcy stops these actions and oftentimes allows you to keep your property. If you wait too long, even bankruptcy may not be able to undo these actions against you.
If you owe money to the IRS or state tax authority, you should look into bankruptcy. For example, chapter 13 bankruptcy allows you to repay these debts over time, frequently without paying interest. Once your bankruptcy case is filed, the IRS and other taxing authorities cannot further penalize you for the taxes owed. It also prevents them from filing liens against your property, levying bank accounts and garnishing wages.
Student loans are another reason why people file for bankruptcy. Yes, it is true that, in the majority of cases, student loans CANNOT be discharged. The collection activities of student lenders, however, can be stopped for up to 5 years. This means that they cannot garnish wages or take your tax refund. While it does not get rid of the debt, it does afford you time to breathe and hopefully come up with a way to handle the debt once your are out of your bankruptcy.
Other benefits of bankruptcy are: eliminate second mortgages (in some cases), reducing your car payment, selling property that is encumbered by too many liens. and
eliminating judgments that have become liens against your property.
Believe it or not, filing for bankruptcy can be the best financial move that people in certain circumstances can make. Do not rely on what other people have told you about bankruptcy. Instead, contact a bankruptcy attorney today to explore your options and obtain a FRESH START.
Christopher T. Vonderau
Bankruptcy Attorney
Wilmington, NC
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