Top 10 Reasons People File for Bankruptcy

1. Eliminate the legal obligation to pay many of your debts.

This process of making a clean slate is called debt discharge. The purpose of a discharge is to reduce debt to give you a fresh start. Whether through a straight bankruptcy (chapter 7 bankruptcy) or through a reorganization (chapter 13 bankruptcy), most or all of your debts can be discharged.

2. Stop foreclosure on your home and allow you to effectively make payments to catch up on your missed mortgage payments.

If your home is in foreclosure, Chapter 13 Bankruptcy will stop foreclosure at any time before the sale. Bankruptcy does not remove mortgages on your property without payment. Rather, bankruptcy will structure a plan to pay off your mortgage arrears (the amount that is behind).

3. Keep your car or other property from being repossessed.

Even if the creditor has repossessed your car, filing for bankruptcy can effectively force them to return your car or other personal property (if the bankruptcy is filed quickly enough). Any previous payments you missed will be consolidated into your Chapter 13 bankruptcy plan. After this, you will no longer pay the finance company, but instead make monthly payments to your Chapter 13 bankruptcy trustee, who will then pay the finance company .

4. Reduce or even eliminate high medical bills.

Sometimes an unfortunate accident or recently discovered major illness can completely ruin a family. Many families have to make decisions about allocating bills. Oftentimes, bills that were once significant pale in the face of large medical bills a loved one takes on. Filing Chapter 7 bankruptcy can greatly reduce the amount of medical bills.

5. Recent job loss.

Studies show that job loss is one of the most common reasons people file for bankruptcy. This is very easy to see. A family can be comfortable with two, perhaps even on a salary. They can take on a regular amount of debt, join clubs, and pay normal bills with relative ease. Suddenly, one or both spouses lose their jobs and a family must go from two salaries to one. Losing a job is closely tied to high medical bills. Losing a job means this family may be left without the insurance protection once provided by their employer. Many times these two factors combined create a mountain almost impossible to climb without the help of bankruptcy.

6. Stop creditor harassing behavior.

Some creditors don’t always take the right course of action when trying to collect a debt. Creditors will often persistently call a particular debtor’s home with demeaning and abusive behavior. Not only is this unethical, it can rise to the level of illegal. In essence, bankruptcy will stay lawsuits from many creditors and stop harassing phone calls and other inappropriate behavior altogether.

7. Restore or prevent your utility services from being shut off.

As you have probably seen, many of these reasons overlap. Some lead others. If your home is at risk of foreclosure, your utility bill may also be at risk of being written off. Filing for bankruptcy can prevent the utility company from leaving you in the dark.

8. Provide help for large amounts of student loan debt.

While it’s true that your student loans won’t be eliminated like many other types of unsecured debt, bankruptcy can consolidate your student loan debt. This consolidation will allow a debtor to make monthly payments through Chapter 13 Bankruptcy that are within the debtor’s financial capacity.

9. End wage garnishments.

Chapter 7 bankruptcy will stop wage garnishment. Wage garnishment basically takes away your weekly earnings many times leaving you without need. Chapter 7 bankruptcy allows you to purchase essential items for you and your family. Chapter 13 Bankruptcy will also help in this regard.

10. Contest certain claims of fraudulent creditors.

Bankruptcy will allow you to challenge these claims from creditors who are trying to collect more money from you than you actually owe. An attorney can provide him with the support and backing he will need to take on these creditors. Lawyers often level the playing field between a large creditor and a single debtor. Filing bankruptcy with an attorney can stop fraudulent reporting by a creditor.