Talk with a knowledgeable bankruptcy attorney before you waste any more money!

Millions of Americans deal with financial hardships on a daily basis. It has been reported that only 39% of American households have enough money in a savings account to cover a $1,000.00 emergency expense---meaning, 61% of people would not be able to do so! This is a scary situation as these emergency expenses do come up regularly. For the people that can’t afford it, they are left with a difficult decision to make. Do they put it on a credit card? Do they take out a loan? Do they forego another expense for the ability to cover this expense? Do they ignore the emergency expense and hope it goes away? Unfortunately, this is far too common of a reality for a lot of people.

How do people end up in that position?

There are many reasons a person could face the reality of not having any money in their savings account to cover such an expense. Some of these reasons, unfortunately, are to no fault of the actual person. The list below is not exhaustive but covers some common reasons.

  1. Loss of a Job – When a person loses their job, they are now faced with paying all of their outstanding obligations but doing so on a limited income. While unemployment benefits are a great way to bridge the gap between jobs, it generally isn’t enough to fully meet your obligations. People generally are used to a way of life and spending. Any change to that could be difficult to deal with.
  2. Medical Issue – One of the hardest financial hardships to overcome hinges on medical. It is far too common where a person suffers an injury, either physically or health related, and now they are unable to work. This inability to work might be temporary but in some situations, is permanent. Similar to the loss of a job above, now a person is attempting to cover their current obligations on a limited income. Further, this person now has increased medical costs they also need to factor in when determining what they can pay and what they can’t.
  3. Divorce or Separation – It’s common knowledge that close to 50% of marriages end in a divorce. If you factor in non-marriages that result in a break-up, that percentage is likely much higher. When people are together, a lot of times they also operate their finances together too. And with that, both partners are used to that level of income. However, if these two people decide to go their separate ways---either abruptly or over a period of time---it is inevitable that their finances have now changed forever. This change causes people to struggle more financially than they would have prior to the divorce or separation. Also, sometimes the debt is taken out in one person’s name---the person with the better credit. After a breakup, now that person is left trying to pay this debt off while the other person just walks away.
  4. Overspending – While it might be taboo in a social aspect admit to overspending, it is extremely common. In today’s world, it is far too easy to overspend. The ease at which we can purchase anything we want from the comfort of our own home by clicking a few buttons on your phone causes a lot of people to make some purchases they otherwise wouldn’t. Also, social media and “Trying to Keep Up With the Joneses” is something we see and deal with regularly. Unfortunately, the instant satisfaction of that purchase that you know you really can’t afford is eventually met with the realization that, shockingly, you can’t afford to pay it.

What happens if I don’t pay the debt?

There is a very simplistic way one can look at their debt and the position they are in: Either they pay the debt back or they don’t. It’s that simple. If they don’t pay the debt back---either by choice or because of an inability to pay it back---what can happen?

  1. Creditor can call you – When you miss a debt payment, it is common to have the creditor call you and remind you of that missed payment and request that you make a payment right away. While one phone call doesn’t seem like that big of a deal, this is just the tip of the iceberg. Imagine a person with 10 different accounts they are no longer paying. They now have to deal with each of these 10 companies calling them---and repeatedly calling them. A lot of people end up just ignoring these calls because they don’t want to deal with the creditors anymore. And in turn, this could lead to bigger problems.
  2. Creditor can mail you notices – Along with the annoying phone calls, the creditors will start mailing you late notices due to the lack of payments. Nobody likes to deal with the normal mail we receive---who wants to now deal with late notices from creditors?
  3. Account sold to a collection agency – Eventually, a collection agency might pick up your account. Once with a collection agency, their employees have one job and one job only: attempt to collect money from you. Again, they will call you and send you notices attempting to do so. And remember, the people you speak with are trained to maximize their efforts at getting you, the debtor, to pay.
  4. Creditor hires an attorney – Once an attorney is brought into the fold, the situation now gets a bit scarier. You will now likely receive a letter demanding that you pay the bill or deal with a lawsuit. If sued, you now have additional fees and costs that you could be held liable for. In the lawsuit, you could eventually have to appear in Court, testify under penalty of perjury, produce financial documents, attend depositions, and possibly even go to trial. This process is costly and time consuming.
  5. Receive a Judgement – If the result of the lawsuit goes in the favor of the creditor, the Judge will now issue a Judgement against you. A judgement is the Judge’s decision in the lawsuit. If the judgement goes against you, the judgement will state, by Order of the Court, how much money you now owe to the creditor.
  6. Collecting on a Judgement – There are generally three ways a creditor will attempt to collect on a judgement: garnish your paycheck (i.e. take money directly from your paycheck), levy your bank account (i.e. take money directly from your bank account), or put a lien on your home.
  7. Drop in credit score – There are several factors that go into your ultimate credit score. By you not paying your obligations, these factors will all negatively impact your credit score. This will cause future credit (i.e., car loan) to be more expensive for you. Your credit score is fixable but only if you actively do something about it.

What is Bankruptcy?

Bankruptcy is a method in which people can resolve their debts and get a fresh start financially. A Chapter 7 is a type of bankruptcy that requires a person surrender their non-exempt assets to the assigned trustee, that trustee sell those non-exempt assets, and ultimately use those funds to pay the creditors. While that does sound scary, the majority of people filing for Chapter 7 do not have any non-exempt assets so they aren’t forced to give any assets up. At the end of the case, the debtor would receive a Discharge, eliminating their obligation to pay certain debts back. While a Chapter 13 has the same end goal, receive a Discharge, the method to get there is much different. In a Chapter 13, the debtor commits to a payment plan for 3-5 years to pay back certain debts. If successful with the payments, the debtor would then receive a Discharge.

What are the benefits of filing for Bankruptcy?

The purpose of filing for bankruptcy relief is to help people get a fresh start with their finances. You might have gone through a divorce and now you are the one swimming up stream trying to keep up with the significant debt in your name. Or maybe you recently were let go of from your job and now you have no way to pay for your car payment. Either way, looking at the possibility of a bankruptcy is the reality facing many people. And with that, below is a non-exhaustive list of several benefits a person could receive by filing for bankruptcy relief:

  1. Get rid of debt – This is the obvious benefit---getting rid of debt. By successfully completing a Chapter 7 or a Chapter 13 bankruptcy and receiving a Discharge, the debtor eliminates certain debts. Once discharged, the debtor no longer has a legal obligation to pay that debt back. There are certain types of debts that survive the discharge, like student loans, certain taxes, alimony, and child support. Some debts that are eligible to be discharged are credit card debts, doctor bills, loans, deficiencies from a car repossession, and payday loans.
  2. Use the Automatic Stay – This provision of the bankruptcy code is crucial in some bankruptcy cases. The above provision, which can be found in 11 U.S.C. § 362, prohibits creditors from taking certain actions against you once the bankruptcy case is filed. For example, if you are facing a home foreclosure, a wage garnishment, or the response period to a lawsuit, filing for bankruptcy initiates the automatic stay and those creditors are prohibited from moving forward with any of those actions.
  3. Stop annoying phone calls – Missing payments on obligations leads to the creditors calling you---a lot. These calls get so bad that some people end up changing their phone number. However, once you hire Modesto Bankruptcy Attorneys, those phone calls will stop. You will then be able to advise the creditor that you have hired our office and to refer any questions directly to us. Then, they will stop calling you and call our office instead.
  4. Protect your home – If you own a house and are missing your debt payments, your house is at risk. If it’s a missed credit card payment, that creditor could eventually sue you, get a judgment against you, and then put a lien on your home. If it’s a missed mortgage payment, they could sell your house at an auction. By filing for bankruptcy relief, you can protect yourself from this happening and ultimately protect your future.
  5. Better your future – The thought that most people have regarding bankruptcy is that it will ruin your credit. While it is true that by filing bankruptcy, your credit score will take a hit. However, in the long run, filing for bankruptcy relief in many cases will improve your credit score. Once you get rid of the debt, you are no longer missing payments, your debt-to-income ratio drastically improves, and your credit utilization ratio is significantly better.

What’s next?

Our team of dedicated bankruptcy attorneys is ready to speak with you regarding your personal situation. Please give us a call at 209-314-3010 or CLICK HERE to schedule your free consultation to discuss your options.