So you finally realize that you have to file for bankruptcy and now you’re looking for an attorney in your area, but how did you arrive at this conclusion, how do you plan on executing and what benefit do you think you will receive. In this blog we shall explore how it is that people come to decide that they need to file bankruptcy and require the assistance of a lawyer, furthermore, we will delve into the best timing for filing bankruptcy and what problems bankruptcy will solve for your particular situation.
There are many reasons why people seek the service of a bankruptcy attorney, but nine times out of 10 it’s going to be for four simple reasons.
- Job Loss: this pertains to the loss of a job, the change of a job or any significant reduction in income from a job or other financial endeavors. Many people are either fired or get laid off, even if this setback was merely temporary, the financial ramifications of not being able to pay your bills for several weeks or several months, but most people in a situation that they simply cannot recuperate from.
- Divorce: divorce is a huge reason why many people are forced to file for bankruptcy. If you just consider the situation, families that were living okay or paycheck to paycheck, suddenly have to maintain two households. Problem is when they split into two households they did not reduce their debt to compensate for the increased amount of money it costs to provide for two separate households. This is especially true when one person is supporting both of the new households and the other is simply receiving alimony or child support.
- Medical Reasons: medical reasons include any kind of medical condition, an accident that leaves you in the hospital, or any other situation that because of your physical condition you simply are not able to return to work for several weeks to several months or possibly years. Just like a job loss, medical reasons can put most families in a situation that they cannot financially recover from. In some situations where the parties are able to recover financially, they are still forced to file bankruptcy because of the large number of medical debts they have incurred.
- Lawsuit Judgment: the last, but not least reason that people have to file for bankruptcy is receiving a lawsuit judgment or simply being in a lawsuit that you know you’re going to lose. Once receiving a lawsuit judgment against you, the plaintiff is able to use the court’s supplementary process system to collect the debt from you. Many times this will be facilitated by having the money deducted directly from your paycheck. Many times this will put people in a situation, that they can no longer financially sustain their household and thus have to file for bankruptcy.
Many people ask me this question all the time, and they simply want to know what is a good indication that their situation has reached the point that they should file for bankruptcy. Obviously, if you do not have the money to pay any of your bills, the situation requires her to file bankruptcy, but there are other situations which are less obvious but tend to indicate that filing for bankruptcy is in the persons near future.
- Only Making Minimum Payments on Credit Cards: one of the first clear indications that you’re on your road to bankruptcy is making the minimum payments on your credit cards. If you cannot pay off at least 33% of your credit card each month, then you are using too much credit, without having the financial means to actually pay it back. Once you get to the point that you can only make minimum payments on your credit cards, and your debt is over $10,000, bankruptcy will certainly be in your future.
- Using Credit Card Balance Transfer Checks: once you start using credit card balance transfer checks to make monthly payments or simply transferring the entire debt from one card to another without any benefit, your on your way to bankruptcy this is called stealing from Paul to feed Peter, this tactic almost always leads to bankruptcy. There are few situations where you may transfer to A Different Credit Card Balance and Receive 0.0% Financing for a Term of a Number of Months up to a Year, and That Situation It’s Actually a Good Idea to Use a Transfer Checks, but If You’re Getting No Financial Benefit from It Than the Reason You’re Doing It Is to Get One Month of Not Paying Your Credit Card Bill and That Is a Bad Indicator.
- Taking money out of your 401(k) or retirement/Pension Plan: taking out money that you have set for retirement is a huge indication that you already should be filing for bankruptcy. The simple fact that you are going to accept the penalty of taking out retirement funds early, while taking the tax ramifications, is a clear indication that bankruptcy is in your future. Before you make the mistake of touching your retirement, 401(k) or pension, you should speak to an experienced bankruptcy attorney.
Now that we’ve dealt with the situation and you realized that you must file bankruptcy, the first thing you must start thinking is when is the best time. Most people never consider this and can waste tens of thousands of dollars of money and headache if they just file for bankruptcy at the right time.
- After Your Financial Situation Has Hit Rock Bottom: many people don’t realize that filing for bankruptcy too soon, can be the wrong choice. When I’m talking about your financial situation hidden rock bottom, I don’t mean you losing everything in life, they’re just not going to get any worse because of a reduction of income. So if you lost your job, that would be hitting rock bottom and after a while loss of the job will put you in a situation where you must file for bankruptcy, it’s better to do it before you get a new job than after.
- Before getting a new job, that has Too High of an Income: you should certainly file for bankruptcy before obtaining a new job, because in chapter 7 bankruptcy each state has a figure that depending on your family size is the amount of money your household income can be and still file for Chapter 7 bankruptcy. If your new job put you above this amount, you will be forced into chapter 13 bankruptcy and you will not enjoy the ramifications of that.
- Before a lawsuit attachment Is Filed against Your Real Estate: if you’re in a lawsuit, you certainly want to file for bankruptcy prior to having a judgment placed on you. The moment a judgment is received the plaintiff may take that judgment and get an execution from the court and present those to a sheriff who will go to the Registry of Deeds in attached that judgment to your real estate. What this does is in the case of your residence, it will make it so you cannot sell the house remortgage the house or transfer the house to someone else without first paying off the entire judgment and interest. If the judgment is attached to real estate you own that is not your primary residence and does not have a homestead filed on it, then the person who attached the lawsuit judgment may sell your house at a sheriff sale, at a much-reduced value to recoup the amount of money of the judgment.
Now you realize that you have to file for bankruptcy, and you’ve even determined when the best time for your particular situation is for you to file bankruptcy, now is the good news, what problems will bankruptcy solve for you.
- Getting out from under Debt: most people who are not in a situation where there contemplating filing bankruptcy can truly understand how psychologically damaging it is to a person to be under extreme debt. The first and most important thing that bankruptcy will give to the person filing it, is peace of mind. The moment you receive your bankruptcy discharge, a huge weight will be lifted from your shoulders. No amount of therapy could ever pay for that feeling.
- Getting a Fresh Start: the second most important thing that filing bankruptcy will solve for you is giving you a fresh start on your new financial future. Once all your debt is removed, and you’re no longer making minimum payments on debts and that will take you years or possibly forever to ever pay off, the feeling is unbelievable. You can finally start moving forward in life, instead of living under the crushing weight of pre-bankruptcy debt.
- Stop Harassing Debt Collectors: people that are right at the point that they must file for bankruptcy, usually are getting hounded by numerous debt collectors. This could be coming in the form of phone calls, mail or even lawsuits. When to file for bankruptcy, something called the Automatic Stay comes into place, which stops all collection procedures, including lawsuits and garnished wages from a judgment. Also, the automatic stay prevents debt collectors from ever contacting you about the debt. That means the harassing phone calls finally stop.
- Start to Rebuild Your Credit: rebuilding credit is usually the father’s thing from the mind of someone who’s about to file for bankruptcy, but it’s one of the most important things you should be thinking of. I know that credit had got you into this predicament to begin with, but it will also help you build your future. There are many things needed for credit, and many things are based on credit such as car insurance and many employers now run a credit check for jobs that are the most sought after.
In conclusion, if you found this blog by searching for a bankruptcy lawyer, you should have a firm grasp on if you’re making the right decision of even filing for bankruptcy. It is almost important to understand why people usually file for bankruptcy, as this helps those who are still struggling with the idea that the inevitable conclusion to their financial situation, is they must file bankruptcy. But understanding, when and how bankruptcy will benefit your life, but also allow you to have a greater understanding of what lies ahead of you.
Joseph F. Botelho, Esq.
BOTELHO LAW GROUP
Attorneys At Law
901 Eastern Ave.
Fall River, MA 02723