No matter how hard working and dedicated you are, financial hardship can strike out of nowhere and leave you perplexed how to continue and get back on track again. You might be experiencing these problems due to various reasons like accumulating unexpected medical bills, losing your job, getting divorced, etc. At such time you are looking for advice and possible solutions to the situation. You might consider starting a second or even a third job, getting a second mortgage on your house or finding alternative financing but there is yet another option that many US citizens chose and that is filing for bankruptcy. Even though this is not the most pleasant experience and will leave you with a damaged credit score, still this can turn out to be the best solution for your case. Below you will find three situations, where the bankruptcy will help you recover from the financial troubles. Always make sure to consult an experienced local bankruptcy attorney who will be able to give you proper advice and prepare the entire case so that it is least stressful for you.
When dealing with a foreclosure
One of the times when people turn to bankruptcy is when they have problems paying their mortgage installments and are faced with a foreclosure. Basically, there are two options here – you want to keep your home or you are ready to let it go and go on.
- If you would like to avoid the foreclosure and keep your home than you should file Chapter 13 Bankruptcy as this will allow you to come up with a repayment plan to cover your payments. In other words, the court will not discharge your debt but give you 3 or 5 years to catch up on the instalments and work it out from there. Sometimes this type of filing allows you even to reduce or modify the secured amount on a mortgage.
- The second option is to file Chapter 7 Bankruptcy, which is possible if your income is low enough and a preferred option if the house is worth less than the amount you owe to the leaser. When the foreclosure is finalized you lose your house but your debt is considered covered even if the proceedings from the house sale were less than the amount you owe.
When faced with huge debt
If you have a huge amount of debt that you are struggling to repay and provided that you expect to be in such unfavorable situation for a long time (due to permanent unemployment or illness for example) then the best way to get rid of the debt is to file for bankruptcy. Here again you have the two options of whether to file for Chapter 7 or for Chapter 13 and you should consult an attorney who will tell you for which procedure you are eligible and which one is better in your personal situation. Bear in mind that after a bankruptcy your credit score will be damaged and will be very hard for you to get a new loan or mortgage. The record of a bankruptcy can stay for up to 10 years, however, some attorneys offer possibilities of how to rebuild your credit history quicker so you should double check that as well.
When student loans are really hard to repay
As student loans are not considered debt in the traditional sense when it comes to bankruptcy, a simple petition will not help you discharge them. It is not impossible, however, to do so and in recent practice there are many successful cases. The studies in the area show a success rate of 40-50% on average and up to 80% in the recent years. There is one ultimate requirement that you need to meet in order to be eligible to discharge your student loans and that is to prove that they are undue hardship. Even though this is not so easy, an experienced attorney who has dealt with student loans will be able to assist you. In proving that you have to pass a test required by the court known as the Brunner test for undue hardship. Do not be startled by name test as these are actually three questions that you need to answer to prove that you do not have the necessary financial means to maintain a living if you repay the loans, that your financial situation is not a temporary one and that you have done your best to make the payments so far. An example of such a situation is that you got divorced and need to pay a very high amounts in child support and alimony.
So, no matter what the reason for your financial troubles is, you should always try to find a way to resolve the problems. Bankruptcy may not sound as the most appealing of options, however, it is a valid one and has been used by many people including famous stars and businessmen. You only need to make sure that you are doing it the proper way so you should hire an attorney who is familiar with this type of cases and has significant expertise and experience.