Bankruptcy cases in the United States are fewer than they were during the financial crisis in 2008. Statistics show that in 2014, the U. S. Court System Administration Office registered 936,795 cases. Compare that to the 772,646 cases in 2019, and you can see that fewer individuals and businesses are declaring themselves insolvent.
However, when your best-laid plans don’t pan out, and you end up being unable to meet your debts, then filing for insolvency becomes a necessary option. But how do you know when you should declare yourself insolvent? Here are three signs that it may be time to look for a low cost bankruptcy attorney to remedy your situation.
1. Creditors Are After You
When your creditors keep demanding that you pay your debt, but you don’t honor it, they ultimately turn you over to a collection agency. Should the collection agency engage with you repeatedly to no avail then, it will proceed to file a lawsuit. At this point, you can choose to go to court and contest the case. However, the outcome of a court case is unpredictable, and if you were to lose, you would not only have to pay the previous debt but also cover the court costs.
An alternative here is to hire a bankruptcy attorney and file for bankruptcy. Once the court accepts your petition, it will issue an automatic stay. As a result, your creditors and their agents will be barred from pursuing you to settle the debt. They will also be blocked from suing you over the outstanding debt covered by the stay.
The automatic stay will remain in effect as long as your case isn’t dismissed or discharged. However, you should note that there are some cases in which your petition can’t help you find debt relief. They include child support, back taxes, student loans, and alimony,
2. Foreclosure
Are you behind on your mortgage and foreclosure seems like a reality? That is one sign that you may need to file for bankruptcy to protect your home. There are several types of insolvency petitions, and each of them has different implications for your home.
Chapter seven and 11 petitions focus on liquidation. Thus, if you file for either of the two your house could be seized and sold as part of the debt settlement process. However, a chapter 13 petition may enable you to save your home by allowing you to create a payment plan. Once your bankruptcy lawyer makes a successful chapter 13 petition, the court will give you a repayment schedule on the outstanding debt.
Factors like the level of secured and unsecured debt, and your income will go into determining how long you will have to repay. Typically, the courts give a three-to five year window for you to settle the debt. Once this plan in motion, your creditors are not allowed to follow up with you on the debt.
3. Inability to Honor a Personal Guarantee
If you’re an entrepreneur, there are times where you need to access funding to keep your company going. Maybe you need an emergency cash infusion, or you’re a startup raising funding. As part of your application, you may need to issue a personal guarantee, which is a legal pledge to pay the credit back. But what happens if you’re unable to do so?
When you sign a personal guarantee, you are held liable even if you own an LLC whose structure limits your liability on company debts. If you realize that you can’t honor the personal guarantee, then you need to consult a reputable bankruptcy law firm. They will help you figure out how best to protect your finances.
File for Bankruptcy at the Right Time
Many people dread filing for bankruptcy, but there are particular times when it may become necessary. Before you begin looking for an attorney to start the process, you need to determine that declaring yourself insolvent is indeed the right decision. Involve a reputable lawyer to ensure your interests care taken care of.
