7 Key Reasons Why it’s Time to File for Bankruptcy
Did you know that California is the state with the highest number of bankruptcies? After all, more than 240,000 people filed for bankruptcy within the span of a year. Florida follows at 94,000 each in an annual basis.
One of the most common reasons for this level of bankruptcy is the medical expenses associated with illnesses and injuries. That’s why it’s important to know when to file for bankruptcy. If you do, you’ll turn it to your advantage and get better financially.
Are you ready to learn when to declare bankruptcy? If so, read on and find out more today.
Reasons to File for Bankruptcy
Making this decision is difficult since it’s time-consuming and will cost you some money. You will also lose any form of financial privacy and control. The feeling of failure that comes with it makes it more hopeless.
But when should you file for bankruptcy? Here are some of the proper scenarios:
1. You Have Overwhelming Debts from Your Own Small Business
It’s always risky when you’re trying to start a small business. A lot of bad things can happen, and it can fail due to the economy and other myriad reasons. If your business fails, there’s a high possibility that it leaves enormous debts with no income to pay them up.
A good way out of this situation is to start filing a Chapter 7 bankruptcy. This bankruptcy type is the most common since you can use your assets to pay your creditors. With this, you can discharge any remaining unsecured debts.
But if you don’t want to end your business, you can try filing for Chapter 13 instead. It helps you restructure your debt while working with the court. This will let you plan a course of debt payment within three to five years.
2. You or a Family Member is in a Life-threatening Health Crisis
Medical bills are often too heavy for a single person to handle. But that isn’t the only reason why you’ll get bankrupt. After all, you might need to pay for travel and lodging expenses too.
You might even end up renovating your house to accommodate your special needs. Your family members might leave work to help care for you. If you aren’t insured for long-term disability, there’s a high chance that you won’t meet your basic living expenses.
That’s why it’s important to file for bankruptcy when your medical debts spiral out of control. That way, you can get it discharged and you can start over.
3. You’re Unemployed for a Long Time
The bills will add up as soon as you’re out of work for a long time period. Even when you get back to work, you’ll most likely find it hard to catch up. It’s important to remember that the benefits with unemployment compensation might not be enough to pay off debt.
The compensation will give you the means of paying your basic housing, food, and utilities. If you find your debt payments too much, you need to protect yourself. File for bankruptcy and do your best to recover from there.
4. You Got Sued
Sometimes, even ordinary people get sued and lose. They become in debt due to the extraordinary amounts of compensation. If you don’t have any form of liability insurance, you might not have the means of paying the result.
Sometimes, the only way to escape this situation is to file for bankruptcy. If your case isn’t related to fraud or fiduciary duty, you can discharge them by becoming bankrupt. It’s even more important if you don’t have the fund to pay for a defense lawyer since it helps you stop losing financially.
5. You Get into a Divorce
As anyone can tell you, divorce is one of the most devastating financial events you can have. The worst part is that it’s the result of existing financial issues. In most cases, people will fight over the money when splitting up, and they’ll all get lawyers.
Couples that make financial decisions based on two incomes is debilitating. It’s especially the case when you allowed yourself to become responsible for handling most of the debt. If you’re in need of financing, you need to read this guide to help you decide
6. You Can’t Afford to Pay Student Loan Debts
It’s important to remember that a Chapter 7 bankruptcy can’t wipe out your student loan debts. But you have an option to file Chapter 13 instead. It’s complicated, but you need to first prove that you got into undue hardship.
A good example of undue hardship is having a permanent disability. You also need to have a good track record of paying debts on time. It’s important to show that you’re willing to pay the debt in good faith before you lost the means of meeting the obligations.
7. You Got a Higher Paying Job
To qualify for a Chapter 7 bankruptcy, you need to pass the means test. Your income plays an important part since the test looks at your income’s average over the past half-year. You’re less likely to pass this test if your income gets higher.
Starting a higher-paying job will mean that your chances of failing the means test will get higher every month you wait. After all, your average income will increase during these intervening months. If you start a lower-paying job, delaying your bankruptcy filing will become the better choice.
Find the Best Time to File for Bankruptcy Today!
It’s important to remember that you should only file for bankruptcy as your last resort. As helpful as it is, it will cost you a lot of time and money. The worst part of getting bankrupt is that it will ruin your credit for many years.
You might lose your car, bank accounts, and your home depending on your state laws. It will also force your creditors to accept less money than the amount you owe. But if you know what your goals are, bankruptcy is an important recovery method.
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