Reasons to File

People are naturally reluctant to file bankruptcy, and many only do so when they are forced to because a creditor has started garnishing their wages or their house is about to be foreclosed upon. But here are some other reasons to consider filing.

  1. You are dipping into your retirement savings to pay your debts. Retirement plans are protected during the bankruptcy process. Do not sacrifice your future financial stability for temporary debt relief now.
  2. You're having trouble making your mortgage or car payments. Don't put your home or car at risk trying to pay off credit cards or other unsecured loans. If you are already behind, filing a Chapter 13 bankruptcy will stop creditors from taking your property, or adding late fees and penalties, and give you time to catch up on the missed payments.
  3. You have student loan or tax debt. These debts are not dischargeable in bankruptcy. However, if you cannot make these payments because you are overwhelmed by credit card and other dischargeable debt, then you need to prioritize and get rid of the debt that you can.
  4. You need a loan modification. Banks will spend months promising to consider your loan modification request and then turn around and suddenly set a foreclosure date. You may choose to seek the protection of the bankruptcy court. You can get a Chapter 13 plan confirmed while you wait for a decision regarding your loan modification as long as you are making house payments equal to 31% of your gross income..
  5. You owe more on your car than it is worth. If your car loan is 2.5 or more years old, a Chapter 13 plan can actually reduce the total of what you owe to the vehicle's current value, saving you thousands of dollars.
  6. You have a second or third mortgage on a house that is currently valued at less than the first mortgage. The bankruptcy judge has the power to completely discharge any additional mortgages or lines of credit if your house is "underwater," saving you tens or hundreds of thousands of dollars.
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