23 Apr Is bankruptcy a Financial Solution?
By: Crispin Caday Lozano
Many people believe bankruptcy as a last resort to save an unsuccessful financial aspect of life. However, financial problems necessitating bankruptcy are not the result of poor decisions. Sometimes people are not financially prepared for a major life change such as unemployment, divorce or illness. This can take a toll not only on a person’s health but also on their finances.
Nowadays, filing for bankruptcy is considered a good solution for those who cannot pay back their unsecured debts as compared to other uncertain options. Credit scores can be repaired and a clean slate can be achieved within a year after discharge.
Question: What warning signs should I consider before filing a bankruptcy?
Answers: If any of the following applies to you, it is time to consider filing bankruptcy:
- If you are facing foreclosure or repossession.
- If your creditors have attached your wages or your bank account.
- If you can’t catch up with your bills no matter how hard you try.
- If you no longer answer the phone because creditors call you night and day.
Question: What can bankruptcy do for me?
Answer: While bankruptcy cannot help you out of every single financial situation, like relief from child support, it can help you with some of the most common types of financial distress. Both State and Federal Laws are enacted to protect your rights and save your dwelling and your ability to earn a living. If you are feeling guilty or ashamed of the financial situation that you are in, consider that in these difficult times, you are not alone. The rich and the poor filed for bankruptcy at least once in their lifetime.
Question: What are the benefits of filing bankruptcy?
Answer: Among the benefits of filing bankruptcy are:
- Allows for the “discharge” of most, if not all of your debts. This means that you are no longer legally obligated to pay the debts.
- Prevents property from being repossessed, or it may require creditors to return property that was repossessed.
- Stops the collection process. This means that creditors must stop attempting to collect on the debts.
- Prevents you from having your utilities cut off, or if they are cut off, requires the utility company to restore service.
- Stops or prevents wage garnishment.
- Halts the foreclosure process and gives you time to catch up on payments. This means you will not necessarily lose your house or mobile home.
- Gives you the opportunity to dispute false claims from creditors who may be trying to collect more than what it owed to them.
Question: Will bankruptcy improve my credit score in the future?
Answer: YES! Although filing for bankruptcy is a black mark on your credit report, it is also important to remember that your existing debt is also a black mark in your credit. Filing a Chapter 7 or Chapter 13 bankruptcy, in many cases, may actually improve your current credit situation because the black mark will go away eventually. If you do not file bankruptcy, the black mark will continue in your lifetime unless you paid all your debts.
Note: This is not a legal advice.
- Bankruptcy will actually improve your credit within one year because your unsecured debts are discharged. Although the bankruptcy will be in your records for 10 years, not filing bankruptcy will make your credit even worse until most your debts are paid.
- If you are being sued by your creditors, most money judgment can be eliminated in bankruptcy.
- Collection actions continue and you can be sued if you are in debt settlement.
- Chapter 7 will eliminate all unsecured debts. If you are near retirement age, you must eliminate most of your debts.
- Bankruptcy will stop foreclosure actions. If your trustee sale date is 10 days before, you can still file for bankruptcy.
- If your salary is being garnished, you have a court case about debts or you are being harassed by creditors, bankruptcy can stop garnishment, court cases, harassing creditors and eliminate the debt.
- Bankruptcy is cheaper, faster and safer than debt settlement which has no guaranteed success.
- Preserve your health, eliminate stress and live a happy life by eliminating your debts which is the root of all problems.
Crispin Caday Lozano is an active member of the State Bar of California, and practices bankruptcy since 1999.