There are many reasons why people choose to file bankruptcy, but the three most common are reduction or loss of income, unexpected or long-term illness, and divorce.
Whether or not someone needs to file for bankruptcy depends on the type of debt they have as well as the amount of debt. For example, a person may have little to no credit card debt, but still have loans, outstanding debts, past due payments on their mortgage, garnishments, repossessions, past utilities, medical debts, or a variety of other debts. As a result, they need to file for bankruptcy.
While bankruptcies are in the public record like any other type of court filing, anyone outside of the people who work in the bankruptcy court would have to specifically seek the information in order to find it.
Being unable to make monthly payments on credit card or other debts is a perfect reason to file for bankruptcy. It is important for people to be able to maintain a monthly spending plan, and if all or most of their money is being consumed by debt, then it will be difficult to pay rent or mortgage, utilities, and other basic necessities.
Filing for bankruptcy usually improves a person’s credit score almost instantly. One of the major factors that determine a person’s credit score is their debt to income ratio, and once someone files for bankruptcy and receives a discharge, their debt is eliminated, which means their debt to income ratio will be significantly improved. Additionally, a person’s credit score can improve quickly and drastically by making car payments, mortgage payments, etc. Prior to filing bankruptcy, an individual can obtain a computer-generated estimate of what their credit score will be 12 months after the bankruptcy. The company will obtain credit scores from indicated to me that on average the score will be 80 points higher than they were prior to bankruptcy. It does vary from person to person.
Almost everyone will qualify for a Chapter 7 or Chapter 13 bankruptcy, the former of which provides a fresh start, and the latter of which is a complete or reorganization bankruptcy.
An individual’s specific circumstances should be considered prior to filing for bankruptcy. Chapter 13 bankruptcies give people the opportunity to restructure their debt and catch up on missed payments on mortgages or car loans, regardless of whether they have missed a full year of payments or just a few months.
Gathering the necessary documentation such as pay stubs and tax forms can take some time, but in general, filing for bankruptcy is not very time-consuming.
For more information on Common Reasons For Filing Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling Eric A. Stamps, Attorney at law, Stamps & Stamps Law Offices at (937) 247-6447 today.