You have been putting off filing for bankruptcy hoping that things will tough out or to get a miracle, but still, it’s not working in your favor. At some time, you know time will surely run out and you get served with a lawsuit. While procrastination is not recommended, you can use bankruptcy to save your bacon at any stage of debt collection. You need to know more about protection as much as you may be afraid of bankruptcy stigma. Being in dire financial need is always frightening and people try to avoid it at all costs. Even people who qualify for bankruptcy still put it off due to an innate optimism that things will turn out fine.

Reasons to File for Bankruptcy Before It’s Too Late

Medical debt and job loss are the top considerations for people filing for bankruptcy.  These are issues that often ruin families. Health problems make it difficult for you to continue working leading to your losing it altogether by quitting or being fired. Job loss and medical debt are toxic combinations as you also lose your income source as your expenses scale upwards.

Delay Foreclosure

Bankruptcy gives you time to modify your mortgage. Don’t file early as lenders may not accept to continue negotiating over your mortgage. A bankruptcy cancels a promissory note of that mortgage and there is nothing left to negotiate technically.   Therefore, it’s better to file for bankruptcy even with pending foreclosure after you know the direction the mortgage modification is blowing.

Creditors Have Sued You for Debt Payments

If your recent income is high then you can file for chapter 7 bankruptcy. The court will examine your recent income for the last 6 months to know your eligibility using a means test. If the income is too high, you can file for chapter 13 bankruptcy that only requires you to settle a portion of the debts.

In case the income has gone down recently due to pay cuts or a layoff, then you can file from chapter 7 bankruptcy and wait a few months. The court will assess your income over several months and do a means test of your average income.

Considerations Before Filing for Bankruptcy

The bankruptcy filing is a big deal as it goes into your credit history for the next 10 years. Therefore, don’t go into the process blind. Consider the following things before you act.

• Organize Your Paperwork – List all your debts from student loans to mortgage and child support if any. For each of the debts verify the amounts with paperwork.
• Examine Your Options – Before filing for bankruptcy, try and talk to your creditors to see if you can pay off the debts. You can ask them to lower interest rates or give you better terms. You can even relocate to a smaller place or get extra employment to cater for your bills.
• Go to a Financial Coach -You can get an unbiased perspective concerning your financial perspective. The financial coach will discuss with your alternatives and help you create a customized plan that can get you out of the red. You also get encouragement and get pointed in the right direction.
• Seek Professional Assistance – If you do everything right and you are still in trouble, then bankruptcy is your only option. Filing for bankruptcy is a complicated process and it has lots of paperwork. There is room for making mistakes. Try to work with a professional like an attorney who will walk you through the whole process. This ensures you do it right.

Do You Qualify for Bankruptcy?

Bankruptcy for individuals has two forms; the chapter 7 and chapter 13. Each chapter has specific monetary qualifications you must meet. Chapter 7 is for people who can’t afford to settle their bills. You must earn less than your state’s median income for similar family size as you.

If the income exceeds the median income, then you can attempt to pass the mean test where the court trustee will look at your reasonable expenses and income to see if you can pay the bills or need the relief offered by chapter 7 bankruptcy.

Chapter 13 bankruptcy is commonly referred to as the wage earner’s bankruptcy as it requires that a person have unsecured debts and a steady income source of not more than $1,184,200 and income less than $394,725.

Bankruptcy affects your credit score and remains on the credit report for 10 years for chapter 7 bankruptcy, while it remains in your credit score for 7 years in case of chapter 13 bankruptcy. Your name goes into the public record and appears in legal notices in newspapers and can be read on media like radio and TV. Co-signers can be on the hook for that debt for chapter 7 bankruptcy, but don’t get pursued in case of chapter 13 bankruptcy.

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