Top Ten Reasons Why People File for Bankruptcy
There are numerous reasons why people file for bankruptcy, and while some are pretty straight forward, others are less obvious. Bankruptcy does not only have to be seen as a black mark on your credit record. It also has some advantages. Here is a list of why people file for bankruptcy, and how bankruptcy might help you financially.
1. No legal obligation to pay many of your debts
The process of wiping your name off all debt is called discharge of debt. The reason for this is to reduce your debt and give you a fresh, new financial start. Whether you are filing for Chapter 7 Bankruptcy (straight bankruptcy) or Chapter 13 Bankruptcy (through an organisation), most, or all your debts will usually be cleared.
2. Stop foreclosure on your house
Chapter 13 Bankruptcy will be able to help you in the event of your home facing foreclosure. Please bear in mind that filing for bankruptcy in this respect does not eliminate mortgage payments on your property, instead it will structure a reasonable plan in order to repay your mortgage arrears.
3. Prevent your car or other property from being repossessed
Filing for bankruptcy can force your creditor to return any repossessed goods, including your car. This can only happen, however, if bankruptcy is filed quickly enough. Any past payments you have missed on your mortgage will be consolidated into your bankruptcy plan. Once you have filed for bankruptcy you will no longer have to pay the finance company. Instead, you will make monthly payments to the trustee of your bankruptcy plan, who will then make sure the finance company is paid.
4. Reduce/eliminate high medical bills
There are unfortunate incidences when an untimely accident or unforeseen illness can wreak havoc on a family’s financial circumstances because of skyrocketing medical bills. Filing for a Chapter 7 Bankruptcy will help reduce the amount of medical bills.
5. Recent loss of employment
According to studies, losing a job is one of the main reasons for filing for bankruptcy. No one should dismiss the possibility of losing ones job, no matter how indispensable you may be at your company. Job loss can happen to anyone, and at the most inconvenient of times. If a family is living off of 2 salaries, and suddenly one of those salaries disappears, their living conditions will change drastically.
6. Stop harassing behaviour and demands from creditors
Sometimes creditors will take drastic steps to get their money from you. Creditors have been known to become abusive and threatening if their financial needs is not met. They will continuously phone you demanding that you pay them their money back. Not only is this behaviour unprofessional and unethical, it could reach a point of becoming illegal. If you file for bankruptcy, your creditors are forced to stop their harassing phone calls and other inappropriate behaviour.
7. Restore or prevent your utilities from being terminated
If your home faces foreclosure, your utility bill may also risk being terminated. Filing for bankruptcy can prevent the utility company from leaving you in the dark.
8. Helps repay student loan debt
Although bankruptcy will not eliminate a student loan, it can consolidate your student loan debt. This will allow the debtor to make monthly payments through Chapter 13 Bankruptcy that they are able to reasonably afford.
9. Puts a stop to wage garnishments
Chapter 7 Bankruptcy will put a stop on wage garnishment, which takes away from your weekly earnings. Filing for bankruptcy allows you to still have enough money to purchase necessities for you and your family.
10. Challenge certain claims of fraudulent creditors
Filing for bankruptcy allows you to challenge any claims from creditors that you owe more money than you do. An attorney will be able to support you in this situation. Filing for bankruptcy with an attorney can stop fraudulent reporting by a creditor.
