Do not delay filing bankruptcy protection
Although it is not for everyone, it is a decision that should be made after consulting with a bankruptcy attorney. For individuals whose financial situation is extremely precarious and have little or no options, however, there are a number of reasons why you should not delay filing bankruptcy. Here are just three major reasons for filing:
For individuals who own businesses, who have lost their jobs, or who have lived beyond their means for too long, creditors eventually lose their patience and will file a lawsuit to collect whatever is owed them.
If you choose to contest the suit, you will have to retain legal counsel to defend you, which could cost you thousands of dollars with no guarantee of a favorable resolution. If you choose to ignore the lawsuit and have a money judgment entered against you, then you face probable wage garnishment, a levy on your bank account and real property attachments.
You have two choices if you are an individual or business owner (not a corporation). If you have a steady income and considerable debt, you might only qualify for a Chapter 13. This will stay any civil proceeding and prevent any creditor from filing a lawsuit against you, from continuing with a lawsuit already in progress, or from collecting on a judgment.
Under Chapter 13, you will have to submit a repayment plan for either 3 or 5 years and use any disposable income to pay off your debts within that time. If you are a homeowner, you will have to maintain your regular monthly mortgage payments, but if you have arrearages, these can be paid over the life of the plan.
If you choose or qualify for a Chapter 7, the lawsuits, garnishments and levies will also cease. In many cases, the creditor will have to repay any funds garnished or levied. Although your credit score will take a severe hit for a number of years, there is a good chance it would have suffered anyway since you were being sued or had judgments against you. In any event, you will save potentially thousands of dollars and enable you to start anew.
Discharge Thousands of Dollars and Keep Your Property
Many people who have lost their jobs or who are facing a catastrophic medical condition have little choice in maintaining some semblance of their lifestyle by maxing out credit cards or emptying their life savings while still facing exorbitant interest rates and mountains of never-ending debt.
Individuals should not delay filing bankruptcy and may not know that they can keep nearly all of their property and assets while discharging credit card debt and medical bills. Under the bankruptcy code, you are entitled to certain property exemptions, which includes a motor vehicle, furniture, jewelry, your home, tools of the trade, retirement funds and numerous others. This means that the bankruptcy court will not seize this property and it may be retained by you.
Credit card debt and medical bills are generally considered unsecured debt so that it is discharged, with no further obligation to you to repay them at any time.
Save Your Home
Although a Chapter 7 filing will only delay an inevitable foreclosure on your home, you can save your home by filing a Chapter 13 plan. To qualify, you need a steady income and have enough disposable income, or funds left over after paying for your regular monthly expenses, to contribute enough money to a 36-month or 60-month repayment plan. This will include any mortgage arrearages to be paid over the duration of your plan.
As an added bonus, you may be able to discharge any second or third mortgages on your home. If your primary mortgage is entirely secured by the value of your home, which is common if you are “under water,” then there is no remaining equity to secure the junior mortgages. These mortgages will be classified as unsecured debt, meaning they are given the last priority in payments and will be discharged at the end of the plan.
If you do choose Chapter 7 and choose to have the foreclosure proceed, you will not be
be forced to pay any deficiencies on your loan after your home is sold at auction, nor will you likely have to incur any tax liability for any losses incurred by your lender.
These are just three of the reasons why people delay filing a bankruptcy and why you should not delay your bankruptcy if you face financial Armageddon.