Nine Reasons People File for Bankruptcy in Washington State
Before we dive into the reasons why you might file for bankruptcy, it's essential to understand what bankruptcy is and how it works. Bankruptcy is a legal process that helps individuals or businesses who are unable to pay their debts to seek relief from their creditors. The goal of bankruptcy is to give the honest debtor a fresh start financially and allow them to move forward with their lives without the burden of overwhelming debt. Now, let's look at nine reasons why filing for bankruptcy might be an option for the honest debtor. Please note that this is a blog post, not legal advice.
Overwhelming Debt: If you are facing overwhelming debt that you are unable to pay, filing for bankruptcy might allow you to clear that debt. Bankruptcy allows you to discharge most unsecured debts and start fresh financially.
Protection from Creditors: When you file for bankruptcy, an automatic stay goes into effect, which stops creditors from harassing you or attempting to collect on your debts. This protection can give you the breathing room you need to get back on your feet. This extends to subrogated claims as well.
Foreclosure Prevention: Filing for bankruptcy can stop foreclosure proceedings and give you the opportunity to catch up on missed mortgage payments. This can help you keep your home and avoid eviction. There is the option to reaffirm your mortgage, or to ‘retain and pay’.
Wage Garnishment: If your wages are being garnished due to unpaid debts, bankruptcy can put a stop to it. The automatic stay protects your income from garnishment, allowing you to keep more of your hard-earned money.
Medical Bills: If you have incurred substantial medical bills, bankruptcy can provide relief. Medical debt is one of the leading causes of bankruptcy, and filing for bankruptcy can help you discharge these debts and start fresh.
Student Loans: While student loans cannot typically be discharged in bankruptcy, filing for bankruptcy can help you manage your other debts, making it easier to keep up with your student loan payments. If a debtor meets the undue hardship standard, then they can have their student loan debts discharge. There is also the option of the ‘Chapter 20 bankruptcy,’ which is when a debtor first files a Chapter 7 Bankruptcy to clear unsecured debts, and then a Chapter 13 Bankruptcy to reorganize student loan and other secured debts. This option comes with risks and may not always succeed. Talk to a bankruptcy attorney about this.
Tax Debt: Bankruptcy can help you discharge certain tax debts, although there are some restrictions. If you have substantial tax debts, speaking with a bankruptcy attorney can help you understand your options.
Peace of Mind: The stress of overwhelming debt can take a toll on your mental health. Filing for bankruptcy can provide you with peace of mind and allow you to focus on rebuilding your financial future.
Eliminated auto loans with negative equity: A redemption is when you turn your car over to the creditor. Redemption is a powerful tool to rehabbing your financial life.
Filing for bankruptcy can be a tough decision, but it can also be the best decision for your financial future. It's important to speak with a bankruptcy attorney to understand your options and determine whether bankruptcy is right for you. If you are facing overwhelming debt, creditor harassment, or other financial challenges, bankruptcy might be the solution you need to move forward with your life.
