People and organizations file for bankruptcy for many different reasons. While large corporations seem to do it routinely, it’s uncommon for individuals to venture down this road, so you may not know if it’s the right decision to make. Read on for five common reasons people file for bankruptcy and why you should consider it yourself.
1. To prevent foreclosure
If you miss three or more mortgage payments or receive a Notice of Default (NOD) from your lender, you might face foreclosure. However, there are ways to halt the process in its tracks, and one of the surest ways is by filing for bankruptcy. Upon filing the petition, all debt collectors are prohibited from continuing their collection activities. Foreclosure is considered a form of debt collection, so filing for bankruptcy is bound to stop it, even if just briefly.
2. To prevent a lawsuit
Failure to pay a debt or credit card bill is often followed by a lawsuit. If the judgment goes in the creditor’s favor, you may temporarily circumvent the liability. It is, however, worth noting that a bankruptcy petition cannot override some judgments. For this reason, you should consult an expert such as this bankruptcy attorney in Ft. Lauderdale before proceeding with your plans.
3. If you are facing unforeseen bills
Emergencies strike when they are least expected. You have probably found yourself in a situation where your car suddenly stops working, or a relative falls ill, and you have to foot part of their medical bills.
It can be a major financial inconvenience to part with hundreds or even thousands of dollars for something you didn’t budget for. If you have a debt you are repaying, you may have to give it up first to address the emergency. Filing for bankruptcy helps you manage this without putting yourself on a collision course with your creditors.
4. It is better than debt management services
Debt management companies are the typical go-to for people who find themselves in debt troubles. While these companies have helped pull millions of people out of financial crises, they are not always the best option at your disposal, depending on your situation’s circumstances. Unlike bankruptcy, which guarantees you protection from creditor harassment, debt management programs are optional for some creditors, meaning you may still be obliged to pay the debt at once.
Overspending is one of the main reasons people file for bankruptcy in the U.S. While it is always advisable to forfeit luxuries you can’t afford, people make mistakes, and there is nothing wrong with trying to redeem yourself. Filing for bankruptcy helps you reduce your debt repayment burden as you try to get your life back on track.
Filing for bankruptcy is a tough decision to make, but it can be necessary when push comes to shove. If you are in any of the above situations but are not sure your reason is sufficient to call for a bankruptcy petition, don’t hesitate to get a second opinion from a lawyer or bankruptcy expert.