When faced with insurmountable debt issues, you will likely start thinking about filing for bankruptcy. A bankruptcy judgment in your favor can instantly make you free from the debts in your life. In the same way, bankruptcy can also be used smartly to avoid other critical situations in life. Below, we look at seven common reasons why people file for bankruptcy.
- Bank Wants To Foreclose Your Home
If you have defaulted on your mortgage payments, the bank can decide to foreclose your home. And if you have no other way to stop the bank from doing it, you should file for bankruptcy immediately. Once a bankruptcy is filed, creditors are barred from taking over any of your assets. As such, the bank will have no choice but to wait for the court judgment.
- Too Much Medical Debts
Sometimes, people can get very deep in debt because of health reasons. And eventually, they might find themselves unable to pay off the loan. As such, the only option for these people is to file bankruptcy in court. In fact, a 2009 study suggested that over 60% of bankruptcy claims were made by people who took massive debts because of some critical illness. That is a staggering figure. So, ensure that you have your health insurance in place to avoid such scenarios.
- Lender Is Seeking To Repossess Your Car
Just as with a house, your lender can also come to take away your car if you consistently fail at paying the monthly installments. However, once you file for bankruptcy, they will have no right to take the car away from you. And this will provide you some breathing space to arrange for the necessary funds to pay the lender. You can even arrange with the lender in the meantime and set up a new payment plan suited to your current income.
- You Lost Your Job And Are Unable To Find Similar High Paying Job
If you have been laid off from your job and are unable to find any work that pays a similar salary, then you will be in a tight spot when it comes to repaying the debt. The pressure from the creditors can get so bad that the only way to get some relief would be to file for bankruptcy. While this won’t avoid the inevitable and you will still lose most of your assets to the creditors, at least you can avoid being pressured to pay an amount you have no way of earning anytime soon.
- Eviction Threat From Landlord
If you have been skipping on paying the rent of your home, the landlord can threaten you with eviction. A bankruptcy filing can block out such demands from the landlord. But this will only be for a short period. On the other hand, it will give you some time to borrow enough money to pay the rent and request the landlord to avoid throwing you out of the home. However, if you are being evicted by the landlord for possessing drugs or other such illegal substances, then a bankruptcy won’t work. The landlord will have full right to evict you.
- You are Transferring To A New State
Different states have different laws when it comes to what part of your assets can be taken over by creditors during bankruptcy. While some states have stricter laws that allow for most of your assets to be taken away, some other states have more liberal laws that will allow you to keep a few of your assets. As such, if you plan on moving to a state which has the stricter laws and is currently residing in a state that has liberal laws about asset takeover, then you should immediately file for bankruptcy while you are still living in your current state. This will give you the best possible debt relief since you will be free from any further payment obligation while also protecting at least a part of your assets.
- Block Out Lawsuits
You can be sued for various damages like car accidents, patent infringement, credit card debt, and so on. By filing for bankruptcy, you can immediately stop these lawsuits. And eventually, the court might declare you bankrupt and discharge any claims raised by these lawsuits. However, do keep in mind that bankruptcy will not be able to stop certain lawsuits like those related to child support, divorce, the collection of taxes, and so on. These lawsuits will still be in effect, and you will be forced to meet their demands or face strict action.