When Is It Highly Justifiable to File for Bankruptcy

When you find yourself either partially or fully unable to pay your outstanding debts, then bankruptcy law allows you get a NYC bankruptcy lawyer and rid yourself of those debts and give yourself a fresh start. You can find all the statutes constituting federal bankruptcy law in the United States Bankruptcy Code. There are also state laws on bankruptcy that cover areas not covered by federal law. As a debtor, you can file your case in federal bankruptcy court.

The Different Types of Bankruptcy

There are six different types of bankruptcy in the U.S. Bankruptcy Code. They all provide you with permanent relief from specific debts, although they differ from each other in their form and also the procedures involved. Most of them can be categorized as chapter 7, chapter 11, or chapter 13 bankruptcies:

• Chapter 7: This type provides for certain assets like a car or home, also known as nonexempt assets. Chapter 7 bankruptcy makes it possible to liquidate them and distribute the proceeds to creditors.
• Chapter 9: This type provides for municipalities to be reorganized.
• Chapter 11: This type is mostly used by corporations and partnerships and provides for the reorganization of the business under supervision. The debtor is also allowed to keep their business as they implement a payment plan. 
• Chapter 12: This type provides for anglers and family farmers.
• Chapter 13: This type provides for the bankruptcy of an individual with a regular income. The income can be used to formulate a 3–to-5-year payment plan.
• Chapter 15: This type provides for bankruptcies across borders. It implements the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.

Is It justifiable to File for Bankruptcy?

Bankruptcy comes with its downsides, such as the adverse effect it has on your credit. You should, therefore, only use it as a last resort. Some people resort to bankruptcy because they want to put an end to creditor harassment. However, most of this harassment is due to minor debts and creditors will never sue for those debts as the legal costs are too expensive. Also, you have the Fair Debt Collections Practices Act on your side if you want to put an end to the harassment. Some state laws enable you to get collection agencies and creditors to stop harassing you. 

However, there are scenarios where it makes plenty of sense to file for bankruptcy. These include a creditor threatening to repossess property that you find important, multiple wage garnishments and the need to delay a foreclosure.

How to Stop Creditor Repossession

When you file for bankruptcy, you trigger an automatic injunction on such things as collection efforts, lawsuits, wage garnishment and foreclosures. If you want to stop the creditors from repossessing your car or home and believe that your income can pay off your debts and still allow you to keep your property, you should consult a lawyer about filing for Chapter 13 bankruptcy. 

If you think you might have large expenses in the future, it might be a better idea to postpone filing for bankruptcy. You can’t file for bankruptcy as often as you like since the law limits this. A Chapter 7 bankruptcy will cancel the debt you have incurred by the time you file while Chapter 13 bankruptcy may not always consider expenses in the future. Because you can only discharge debts filed, it might be a good idea to wait for substantial expenses to fall due and then include them in your paperwork to get the largest possible discharge. 

Bankruptcy law is complex in general, and it is always a good idea to get yourself a bankruptcy lawyer to help you deal with your specific circumstances.