Should You Protect Your Home by Filing for Bankruptcy?
We’ve all had ups and downs financially. The problem comes when the down is completely unexpected or far below any expectation for which you may have made preparations. Regardless of how it happened, sometimes we can’t make it happen financially. If you find yourself in this situation, you may have made the same move as many before you – your mortgage is current and up to date, but every other bill you have is falling more and more behind because your mortgage is the only thing you can afford to pay. At this point many ask themselves if the best move might be filing for bankruptcy to protect their home.
If you plan to file for Chapter 7 bankruptcy, you should be able to access the benefit of a discharge that wipes out all your debt, but allows you to keep your assets: house, vehicles, retirement account, personal property, etc. As long as you do not have equity in your property (or the limited amount allowed by Chapter 7 bankruptcy law), you can protect your home by filing for bankruptcy.
Don’t overlook one important factor: the timing of this particular issue is everything. For instance, if you lose your job and the result is that you fall behind on all of your bills, the time to file bankruptcy is at that point. Don’t wait until you have a new job and are making a good living again. Doing so is not to your financial benefit. Make use of bankruptcy protection at the point in time when you need it the most. If you wait until you are regaining your financial footing, bringing in a good paycheck again, your income may cause your bankruptcy case to be considered differently. If you file when your income is low and your debts are high, the likelihood of your case being closed with all debts discharged is high. You’ll receive the relief from overwhelming and past due debt that the bankruptcy discharge offers and then you can continue looking for that better paying job you need. If you filed for bankruptcy at the low point, by the time you find the right job, your new and improved income can be used to start rebuilding your credit and starting over.
In some cases, individuals in desperate need of a bankruptcy discharge waited to file until they got a new job. Regardless of how long they were out of work, how out of control their debt became, etc. the income from the new job is too high and the bankruptcy court will decide that the individual is capable of paying back some or all of the debt rather than receiving the desired discharge of all debt.
Many respond to this situation with the typical a typical attitude that everyone recognizes. Fair is fair! You incurred the debt – pay it back! Generally speaking, that IS fair, but in situations where debt has become impossible to handle for a substantial amount of time, the interest rates have spiked (sometimes over 30%), the late payment fees have resulted in over credit limit fees all snowballing into a balance that is double or triple the original by the time the consumer finally files for bankruptcy.
Paying back what you owe is admirable, but it seems to me that paying back twice or triple what you owe to a collection agency is an entirely different matter! If you need to discuss the potential benefits of filing for a Chapter 7 bankruptcy, contact the experts in southern California bankruptcy law here at Westgate Law today.