7 Reasons to File for Bankruptcy

In the wake of economic recession, bankruptcy is on the rise. Difficult times have lead once-stable families into serious financial trouble, leading many to conclude that bankruptcy is the only option. If you are weighing the pros and cons of bankruptcy, you aren’t alone. The points below represent a fraction of the reasons to file. Take a look before taking the plunge. The following reasons are more common than you think.

  1. Ballooning debt. When credit cards and interest rates spin out of control, motivation to file for bankruptcy can take a life of its own. Chapter 13 works to help qualify people restructure their payments for a period of three to five years. When you cannot afford to keep up with a restructured plan, Chapter 7 bankruptcy works to discharge debt altogether.
  2. Halt foreclosure proceedings. Regardless of the bankruptcy type you choose, the simple act of filing will halt home foreclosure proceedings. Although Chapter 7 bankruptcy will not protect you from eviction, it will delay the inevitable until your case is decided. On the other hand, Chapter 13 can stop proceeding completely if you stick to a reduced payment schedule. Both outcomes depend on a judge’s ruling, so be prepared to prove your case.
  3. Prevent car repossession. Filing for Chapter 13 bankruptcy can protect your transportation options. Consolidating your missed auto payments into a bankruptcy judgment means you get to keep your car.
  4. Relief from medical bills. Unforeseen medical expenses are a common cause of bankruptcy. Those living without insurance are at risk of owing hundreds or even thousands of dollars. While some expenses are exempt, Chapter 7 bankruptcy can drastically reduce or obliterate a large portion of medical debt.
  5. Unemployment. Since 2008, the U.S. unemployment rate has skyrocketed to a dismal 11 percent. Since then, it has struggled to improve beyond the 9 percent mark. Families affected by the recession have been forced to sacrifice their lifestyles, and in many cases, their basic financial stability. With no employment and loss of insurance, the path to bankruptcy is a short one. Chapter 13 is deemed the “wage-earner’s” bankruptcy, requiring proof that you can adhere to a repayment plan. However, In the case of prolonged unemployment, Chapter 7 may be the best solution.
  6. Keep the lights on. In addition to foreclosure, bankruptcy protection can stop other proceedings in their tracks. If you are unable to pay for utilities, filing for Chapter 7 or 13 can force the utility company to keep your electricity running while your case is decided. The same is true for gas and water suppliers. When circumstances are dire, don’t risk your safety by delaying the inevitable.
  7. Reduce the burden of student loans. Education costs are climbing every year, and many students cannot afford to attend school without some sort of student loan. While federal loans offer a fixed interest rate, the danger of variable interest private loans can be as problematic as ballooning medical bills. Chapter 13 will not eliminate your educational debt, but it will consolidate it into payments proportional to your income.
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