In the event you are in a position to need to file a bankruptcy petition there are certainly some potential positives. Keep in mind that the people I meet with at Halcomb Singler, LLP, regarding bankruptcy are typically in a position where they are late or will soon be late on their financial obligations, are sometimes weeks away from their paycheck being garnished, must sometimes choose between buying food and paying credit card bills, and generally really stressed out about their finances. So, when bankruptcy is a viable option, there are certainly some positives.
1. STOP GARNISHMENT: In Indiana once a creditor has obtained a judgment it can garnish 25% of take home pay in most circumstances. Most people I know can’t live on 25% less than they make. The filing of a bankruptcy petition will prevent a garnishment if it has not yet occurred or stop a garnishment that has already begun. In some circumstances some funds that have been garnished prior to bankruptcy can be recovered for the person who filed the bankruptcy petition.
2. STOP OR DELAY SHERIFF SALE: The filing of a bankruptcy petition, if no prior bankruptcy petition has been dismissed by the Court within the last year, will stop a sheriff sale. If a person files a Chapter 13 bankruptcy and will be able to make up the payments over time then the sheriff sale will not be reset. If a Chapter 7 bankruptcy is filed and no agreement can be reached with the mortgage company regarding the debtor keeping the home then the sheriff sale will likely be reset for a later date. Nonetheless, it can give a family additional time to find a new residence.
3. REPAY OR DISCHARGE BACK INCOME TAXES: If you file a Chapter 13 Bankruptcy, your income taxes will either be discharged or repaid through a repayment plan (depending on the age of the income taxes and a few other factors). Even in a Chapter 7 your income taxes may be dischargeable. You will need to speak with a qualified bankruptcy attorney to determine whether you will still have to pay your income taxes back after a Chapter 7 bankruptcy.
4. UNSECURED DEBT GONE: This is probably the biggest positive of filing bankruptcy. If you file a Chapter 7 bankruptcy your credit card, unsecured loan, payday loan, medical bills, and virtually all other unsecured debts (except some income tax, sales tax, student loans, withholding tax) will go away. From the moment you meet with a bankruptcy attorney and decide that filing bankruptcy is the correct course of action for you there will be no more unsecured bills to pay. If you file a Chapter 13 bankruptcy you will likely repay a portion of your unsecured debt, but the payment is typically much more affordable through bankruptcy than outside of bankruptcy.
5. WEIGHT OFF OF YOUR SHOULDERS: Perhaps I should have started with this positive. I think one of the largest positives of bankruptcy is having a plan to either eliminate or deal with the debt. I know that everyone I meet with regarding bankruptcy options has sat down and tried to figure out how to pay off their debt. However, there are tools that can be used in bankruptcy that are simply not available outside of bankruptcy. Knowing that the debt situation is going to be solved and that there is a plan to put the financial hardship behind you is a very freeing and relaxing feeling for most of my clients. One client actually told me that after an initial meeting with me that they were now able to go to sleep at night.
6. GET RID OF A SECOND MORTGAGE: I know this one sounds too good to be true, but in some circumstances in the event of a Chapter 13 bankruptcy filing a wholly unsecured mortgage can be stripped off and simply be unsecured debt. For those who are upside down on their homes due to a second mortgage taken out at the height of the housing market this can be an unbelievable benefit.
7. AVOID JUDICIAL LIENS: In Indiana if you own real property in the same county where a judgment has been obtained against you then a judicial lien may have attached to your real estate. In bankruptcy such liens can sometimes be “avoided,” or taken off of the property.
There are many other potential positives to bankruptcy. There are also some negatives to bankruptcy. If you find yourself in a position in which you are unsure how to handle your debt and would like to meet with me to discuss the pros and cons of bankruptcy please feel free to call my office at (317) 575-8222 for a consultation or click here. There is no fee for this initial consultation.