Filing Emergency Bankruptcy for Immediate Creditor Relief

As a general rule, filing for bankruptcy to relieve yourself of debt to your creditors should always be considered an absolute last resort. In fact, most states have laws in place stating that in order to file for bankruptcy you must first attend and successfully complete a government approved credit counseling program. You must also be able to show proof that you’ve taken every other possible measure in hopes of avoiding bankruptcy court. Most courts across the country will ensure this has been done before even allowing a filing to take place, so if you are looking for emergency debt relief, you need to understand exactly what the bankruptcy process entails.

The Effect of Bankruptcy

Upon filing for bankruptcy, you:

• Can file a chapter 7 to free yourself from debt by liquidating assets to pay creditors off. Once assets are sold, you are released from financial responsibility to your creditors, or
• You can file a Chapter 13. You maintain possession of your assets but enter into a repayment agreement that lasts for 3-5 years until your debts have been resolved.

This may seem like a positive way out of your debt, but the scar this action leaves on your credit lasts for years and can make it very difficult to repair your overall credit score. Sometimes this action is the only way, but in most cases there are options that are less damaging to your financial standing than filing for bankruptcy, no matter what chapter you’re considering.

If you do decide this option is right, it can provide immediate creditor relief because an automatic stay will be put into place. This means your creditors will have to stop all collection activities- including foreclosure or repossession- immediately.

When to Consider Filing

Determining whether or not you file for bankruptcy is not a decision you should make quickly, or “off the cuff”. This should be a calculated and educated decision on your part, and you should have consulted with a bankruptcy attorney before coming to the final decision of filing. You should consider seeking financial advice and begin contemplating bankruptcy if:

• You currently do not have adequate (or any) health insurance to cover medical expenses.
• More than one credit card is at the set limit.
• You’ve begun to borrow money for items typically paid for in full.
• You’re only able to afford the minimum balance on all of your credit cards, or you’re unable to pay the minimum balances on any of them.
• You’re using one credit card to pay the balance of another.
• You currently have more than one equity loan on your home.
• You are living “check to check” with no emergency savings.
• The IRS has issued a tax lien against your home, or there is currently a pending foreclosure on your property.
• You’ve recently had property repossessed.
• You aren’t sure of your debts because you haven’t been paying attention to them.

Getting Help

If you currently meet any or more than one of the above criteria, you should most likely consult a professional bankruptcy lawyer and consider all of your available financial options. Your attorney can help you decide if bankruptcy is the right option and, if so, can help you file so your creditors will have to immediately stop collections activities.