Bills Stacking Up and Thinking of Bankruptcy: How Can it Help?

If your unpaid bills are stacking up and you are unsure of how or even if you will be able to repay them, bankruptcy may be able to help you.  Perhaps you lost your job during the recent economic downturn, or perhaps an unexpected medical bill added tens of thousands of dollars to your debt load.  Whatever the reason, bankruptcy offers certain protections to individuals who are unable to pay their debts and can help with your unpaid bills.  By declaring bankruptcy, you are not giving up on your financial obligations; rather, you are acknowledging that you need financial help and you have nowhere else to turn.

How Bankruptcy Can Help

• One protection that bankruptcy offers to an individual who cannot pay their bills is protection from creditors. 

Once a bankruptcy petition has been filed, your creditors are prevented from harassing you with collection calls or pursuing legal action against you such as lawsuits or other means of recovering unpaid debts.  Your car cannot be seized and foreclosure proceedings cannot be initiated on your home or other property once you have filed your initial bankruptcy petition and throughout the subsequent proceedings.

• Another way that bankruptcy can help you if bills are stacking up and you are worrying about how you will pay them is by helping to discharge some of your debts. 

Most bankruptcies are filed as Chapter 13 due to recent changes in the US Bankruptcy law.  This type of bankruptcy allows you to repay some of your debts while keeping most of your property.  After the court determines what debts need to be repaid and how much of those debts will be satisfied, much of your remaining debt will be discharged, meaning that you are not required to pay it back.  The debt forgiveness aspect of a bankruptcy is one excellent means to help with your unpaid bills and other financial problems.

• Yet another way bankruptcy can help you is if you have rental properties which are worth less than you paid for them. 

In a Chapter 13 bankruptcy, you can perform what is called a cram down, meaning you will negotiate with the mortgage company to have your investment properties revalued and your outstanding debt on them reduced to the market value at that time.  Doing this can save hundreds or thousands of dollars a month on the mortgage, and even more than that over the life of the loan. 

Getting Help

There are many other ways bankruptcy can help, and you should contact a lawyer if you are considering the bankruptcy option. Your attorney can help you evaluate exactly what bankruptcy may be able to do for you, and assist you in determining what your best option is.