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When should you file for bankruptcy?

On Behalf of | Dec 20, 2022 | Bankruptcy

Filing for bankruptcy is often someone’s last resort when they are in a bad financial situation. It can be hard to know when you need the protection of bankruptcy or when you might be able to correct your financial situation without taking any drastic steps.

Unfortunately, a lack of information about how bankruptcy works and what it can do may lead to people delaying bankruptcy for too long. They wait until their finances are in a very poor position rather than taking action as soon as their debt starts harming their daily lives. What are some of the most important and unignorable warning signs that someone should potentially file for bankruptcy?

A creditor has filed a lawsuit

As soon as you face the potential of wage garnishment in civil court, you may need to act aggressively to protect what financial resources you have. Filing for bankruptcy will lead to the temporary dismissal of a pending creditor lawsuit and potentially the discharge of what you still owe on that account.

You have missed payments on your vehicle

Most people cannot support their families without transportation, but their vehicle is also the collateral property for the loan they used to purchase the vehicle. You could be at risk of losing your vehicle and all of the money you have invested in payments thus far to repossession after you miss payments.

Lenders may not even warn you before they send a tow truck to load up your vehicle and leave you stranded. When you file for bankruptcy, you can prevent imminent repossession and put yourself in a better position to negotiate with your lender.

When you’ve missed mortgage payments

Maybe you haven’t got a foreclosure notice yet, but you are more than a month behind on your payments. When you know that you need to catch up on your mortgage and worry that foreclosure could be imminent, bankruptcy can help. It can free up more of your money so that you can catch up on your mortgage and can also help you potentially negotiate with your lender so that you can remain in your home and reading control over your personal finances.

Instead of waiting until you face some kind of imminent and legal issue or financial hardship, exploring personal bankruptcy when you have fallen a month or two behind on some of your obligations could help you make the most of the benefits and protections that bankruptcy has to offer.