When should you file for bankruptcy?

When you owe creditors a lot of money and don’t see yourself discharging all the debt, you may be tempted to file for bankruptcy. Filing for bankruptcy is not that easy as you may think. Sometimes you may need help with your chapter 7 bankruptcy case, which means you should decide what exactly you should do.

So, when is the right time to file for bankruptcy? Is bankruptcy the only way to find relief from debt? Here are some situations that may force you to consider filing for bankruptcy.

1.  You face eviction from your home

If your landlord is evicting you from your home, you should think of filing for bankruptcy.  Any bankruptcy is more likely to put an end to eviction for some time. 

However, if you file for bankruptcy once your landlord has already obtained a judgment for possession, you won’t stop an eviction from happening.

2. Your car is facing repossession from the lender

When you file for bankruptcy, you are also putting an automatic stay and immediate stop to any attempt by lenders to repossess your car. You can prevent car repossession by lenders when you include back payments in your plan. 

This enables you to get your car back when the lender repossessed it.  You can always contact a bankruptcy attorney in your state if you want to prevent lenders from reprocessing your car in case of bankruptcy.

3. The bank is targeting foreclosure of your home

Filing for bankruptcy can stop foreclosure from happening. When you file for bankruptcy, an order from the court will stop your creditors from any collections. It will also postpone any foreclosures.  However, when you file for Chapter 7 bankruptcy, it doesn’t have a mechanism to keep you in your house.

The bank can still file a petition to lift the stay, which means the relief for collection will only be temporary.  Therefore, if you want to keep your house, you should only file for Chapter 13.

4.  You want to stop any lawsuit

Filing for bankruptcy can also help if you want to stop any lawsuit against you. For instance, if someone is planning to sue you for car accident damages, credit card debt, or medical debt, bankruptcy will stop the suit from happening.

 It doesn’t make any sense to pay an attorney to help you defend the lawsuit if you’re already facing bankruptcy.

5.  You got a higher paying job

You must pass the means test to qualify for Chapter 7 bankruptcy. To pass the means test, your income is essential because the test will look at your average monthly earnings for six months before you file for bankruptcy. If you have a higher income, you are not likely to qualify for a bankruptcy filing.

If you get a high-paying job, it means your mean test average will keep shooting as you wait to file for bankruptcy. You can pass the means test sooner if you file for bankruptcy before getting a higher paying job. If your income is higher than what you should cover every month, the bankruptcy trustee may consider converting to Chapter 13.

Final Thoughts

Many situations call for filing for bankruptcy. Ideally, when you feel like you are not able to discharge all your debts, you are free to file for bankruptcy and get relief from the pressure. The essence of bankruptcy is to give you enough time to clear your debts and replenish your credit report. 

If you’re planning to file for bankruptcy, you should not hesitate to hire a bankruptcy attorney to take you through the process.

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