When Is It Time To Consider Bankruptcy?

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No one ever really wants to file bankruptcy.  After all, admitting to financial distress and that you have lost control of your finances is not an easy task, especially for someone who has a great sense of pride and independence.  Filing bankruptcy is admitting that you need help and for many people, that initial step is the most difficult one to make. 

However, when is it absolutely, without a doubt time to consider bankruptcy?  Here are some good leading questions to help you determine if bankruptcy is the right option for you.

1. Is the financial stress you’re under affecting the rest of your life and personal relationships? For our married clients, not only do their finances improve post bankruptcy, so does their marriage.  After all, what do you always fight about- MONEY! And your finances will be in better shape post bankruptcy.
2. Are you depressed, anxious, or otherwise physically stressed due to being unable to make your monthly payments on time or due to collectors calling? 
3. Is your home in foreclosure?  If so, did you know that you can delay the process, allowing yourself more time to catch up on payments, perhaps even eliminate a second mortgage, if you file for bankruptcy? 
4. Are you currently having your wages garnished?  If so, and if you are barely able to make your monthly payments, such garnishment can wreak havoc on your financial stability and budgeting.  Filing bankruptcy can stop the garnishment and possibly discharge the debt, depending on what type of debt it is (taxes, child support and many student loans cannot be discharged). 
5. Are you able to save any money at all?  If you answered no to this, then bankruptcy might be your best option to get back on your feet financially.  If all of your monthly income is going toward necessary expenses and bills, you will never be able to save for a rainy day and get yourself in a better financial position.  This ability to save is a crucial step to getting on the right track financially.  

Filing Bankruptcy Can Stop Your Wage Garnishments

Garnished wages are something no one wants to deal with, especially when a too-tight budget makes living paycheck to paycheck a common occurrence.  However, if you find yourself in this situation, it is important to know that filing bankruptcy stops all garnishments except domestic support obligations such as child support and alimony.

When a bankruptcy is filed, an automatic stay is created. An automatic stay is a term that is used in bankruptcy to denote an automatic stop to all garnishments and collection efforts when the bankruptcy is filed.  A creditor can petition the court to allow them to resume collection efforts after an automatic stay has been placed, but must have a valid reason for submitting this request.  In most cases, the court will not allow collection efforts to resume.  Exceptions to this, however, are domestic support obligations such as child support and alimony.

The automatic stay is officially over when the bankruptcy is discharged or dismissed.  In a discharge, the creditor to whom you owed the money will likely be included in the discharge, so the garnishment will not continue.

If your wages were garnished prior to filing bankruptcy, there are ways that you and ensure the garnishment stops as quickly as possible.  First, you should give a written notice of the bankruptcy filing to the payroll department of the company for which you work.  If the wage garnishment was handled by the local sheriff’s office, you should notify that office, as well.

 

In some cases, you might qualify for a return of the garnished wages.  To qualify for this, the garnished wages must have been over $600 and you must have had enough exemptions applied in your bankruptcy to cover the amount.  This must occur within 90 days of your bankruptcy filing.  As tough as your current situation may be, imagine if you suddenly received 25% less!  That’s what a garnishment can do and the most effective way to stop it is to file a bankruptcy.

Will a bankruptcy require me to sell or get rid of my car and home?