7 Reasons to File Bankruptcy

Written by Jessica Alba

With rising unemployment and the increased cost of living, many people are having a really tough time making ends meet. The majority of the population is only one paycheck away from financial disaster. Who can save money, when it is already taking two incomes simply to pay for the monthly expenses? Even though it is usually the choice of last resort, there are actually 7 reasons it may be necessary to file bankruptcy.

The 7 reasons to file bankruptcy all have to do with what the creditors can do to collect their debt. It will be better to take charge of your negative financial situation than wait for the people to whom you owe money to start making your life totally miserable. For example, what about:

Your Car

If you get behind on your car payments, and simply wait for the creditor to take action, you can wake up in the morning and find your automobile missing from the driveway. Maybe you are at the grocery store and reach your parking space with a cart full of frozen goods only to find your car gone.

Instead, it would be better to try and sell your car. You will probably get more for the vehicle than the creditor will if they have to sell it after repossession. You can use the money to satisfy some of the debt, and maybe buy yourself a little more time. It would be a lot better than having the surprise of finding your vehicle gone at an inopportune moment.

Your House

If you file bankruptcy, you cannot simply be booted out of your home, especially if you have kept up with those payments at least. You have some options. But, if you do not file bankruptcy, foreclosure procedures will be initiated. It takes time. But, you could find yourself without a place to live in 3 months or so.

However, if you file for bankruptcy protection, you may be able to save your residence from creditors. You will need to discuss the issue with a lawyer, and find out the laws and the different types of bankruptcy. For example, you may want to file chapter 13 and have a repayment plan to pay off at least part of your debt to the people you owe.

You can file chapter seven, and most of your debts will be wiped out. But, in return, you may have to give up some of your possessions. Either way, creditors will not be able to take away the really important items that are essential to the basic necessities of life.

Student Loans

The one financial obligation that will not go away, even if you file for any type of bankruptcy, is student loans. If you do not come to some sort of agreement for their repayment, your wages will be garnished up to 10%, and you will never see that money in your check until the amount of the loan has been satisfied. So, make sure you make the necessary arrangements, no matter how bad your finances have become in the last few years.

Child Support

Unfortunately, even if you are going through major financial difficulties, you will still owe child support. After all, your kids still need the basic necessities of life. However, bankruptcy can help get your ex-spouse from harassing your for payment. Whether you have back support due, your support payments can be restructured to get the payments caught up. Plus, most states allow you to go back to court and lower the support if your income has also decreased due to a job change or a layoff.


If you have been ordered by the court to pay fines, do not disregard the payments due. Otherwise, you may quickly find yourself behind bars. But, if you file bankruptcy, and have a slew of parking tickets, for example, they will probably be dischargeable fines. You will owe them no longer.

However, if you are ordered to pay fines or restitution due to some sort of criminal action, no bankruptcy will fix the problem. You are stuck with what you owe, and you had better go without a meal or two, before you fail to pay, unless you prefer the 3 squares supplied at your local jail.


Almost everyone in America has heard the saying, “The only 2 sure things in life are death and taxes”. Unfortunately, it is basically true. If you are behind in your taxes, you are obligated to pay, no matter what. In fact, any future tax returns can be confiscated, until your debt to the government is paid in full.

So, check with the bankruptcy laws, and see if the repayment schedule can be restructured to help you out some. At least bankruptcy can free up some of the money going to other debts, so you can use it for taxes.

However, you cannot file bankruptcy at all, if you have failed to file your taxes in the past. Even if the government has not caught up with that fact yet, proof of your income and filing go hand-in-hand.


If you do not file bankruptcy, you are a prime target for lawsuits. Then, if you do not contest it in court, an automatic judgment can be placed against you. Even if you fight it, losing will usually result in also paying court costs for you and the plaintiff. Then, your financial woes will only be compounded.

In short, filing for bankruptcy does not negate all of your financial obligations. But, it will free you from some or most of your debts, so you have more money to pay the others. Plus, some of those financial obligations may be restructured to make them more manageable.

Call us today to see what financial options are best for your particular situation.