Filing for bankruptcy is a huge decision, and usually it has to be made under pretty extreme stress. Your circumstances are unique – so the best way to know if you should file is to call us at 214-760-7777 for a free consultation. The pandemic and ensuing lockdowns have made the situation even more stressful for many DFW area residents. This post will help answer a few high level questions, but it is always better to talk to an expert to get answers about your specific situation.
In general, these are a few of the most important questions to consider before filing for bankruptcy:
- Can you pay back your debts outside of bankruptcy?
- Are creditors suing you to collect their debts?
- Are you facing foreclosure or repossession of your property?
- How much property do you own?
Can you pay back your debts outside of bankruptcy?
Before you decide to file for bankruptcy, think about the types of debt you are trying to eliminate – and consider whether you can pay off those debts outside of bankruptcy. For example, if your main struggle is credit card debt, determine whether you can really afford to pay it off. If you make enough money to pay back your credit cards, you could consider consolidation, where you combine them into a single loan or settle your debt with the credit card company.
If you are behind on other types of debt (like your mortgage or income taxes), it might be possible to get a mortgage loan modification or work out a payment plan with the IRS. If you can’t afford to pay back your debts and your creditors are not willing to work with you, bankruptcy may be the right choice for you.
Are you being sued by your creditors?
If you default on your loans or credit cards, your creditors can sue you to collect their debts. If you do not oppose the lawsuit, the creditor will typically obtain a default judgment against you. Depending on your income and the amount of assets you own, they can then begin garnishing your wages or placing liens against your property to enforce the judgment and collect the debt.
If you are being sued by creditors, bankruptcy will stop or delay the lawsuit by placing an “automatic stay” on almost all collection actions. If the debt is discharged in bankruptcy, the pending lawsuit will be dismissed.
Are you facing repossession or foreclosure?
One of the most common reasons most people file for bankruptcy is to save their home from repossession or car from getting repossessed. If you fall behind on your mortgage or car loan payments, your lender has the right to take the house or vehicle back. This is why these obligations are called secured debts.
Chapter 13 bankruptcy can stop or delay the foreclosure or repossession and allow you to get caught up on your payments. In addition, if certain conditions are met, you may be able to reduce your loan balance with a “cramdown” – or get rid of your second mortgage or other wholly unsecured lien through lien stripping in a Chapter 13.
What if you own nonexempt property?
Before filing for bankruptcy, you have to consider the amount of property you own. In Chapter 7 bankruptcy, be aware that the bankruptcy trustee has the power to sell your nonexempt assets to pay back your debts. Also, even though you can keep all of your property in Chapter 13 bankruptcy, you would have to pay your general unsecured creditors the value of your nonexempt assets through your repayment plan.
This means that the amount of property you own should be taken into account whether you are considering a Chapter 7 or Chapter 13 bankruptcy. Exemptions help you keep a certain amount of property in bankruptcy.
If you have more questions about filing for bankruptcy, you should call us today for a free consultation. We’ve got the best bankruptcy lawyers in Dallas, and you will get to speak directly to an expert. We will explain everything in as much detail as you need so that you can be sure you fully understand every option that’s available to you. Call us today at 214-760-7777 – we are here to help!