If Someone Is Falling Behind On Payments Should They Consider Bankruptcy?

Someone pulling out of their 401K, IRA or their pension plan to pay off unsecured debts is the worst financial decision anyone can make. First of all, retirement plans, 401K, pensions or IRA, are totally exempt from any type of creditor action in the state of Ohio, so even if the creditor sued the person and got the judgment against them, they would never be able to touch the person's retirement, which is why pulling money out of there to pay off unsecured debts is a very bad decision. Younger people who are in retirement plans should not count on social security being part of their retirement in the future, because no one knows how long social security will be able to pay out. Their 401K or their IRA might be the only retirement they have to carry them through those years after they have retired and are not able to work anymore. People should never reduce their retirement plan, and they should never pull money out of their retirement plan to pay off credit card debts. The best thing to do would be to file bankruptcy to get rid of the debt and to maintain their 401K or their pension plan; paying debt with funds from their retirement plan would be the worst financial decision anyone could make, because it would be devastating if they did not have those funds available after they got to the age of retirement, and did not have enough money to carry them through their retirement.

Should Someone Consider Bankruptcy If They Have A Lot Of Medical Bills For Themselves Or Immediate Family Members?

Medical debt is dischargeable in bankruptcy. There are now a lot of doctors at hospitals who are actually suing to recover any unpaid medical debt. The hospitals and the doctors are no longer willing to wait for the $10 a month payments or the $5 a month payments until it is paid off, so they sue the person, get a judgment against them and start garnishing their wages. Bankruptcy would relieve the person of any of that medical debt.

A lot of people wonder if the hospital would ever treat them again if they filed bankruptcy, but a hospital cannot refuse anyone service, regardless of whether they are owed money or if the person got rid of the debt through bankruptcy. A person would never be denied service in a hospital because the hospitals are not allowed to do that. Getting rid of medical debt is a big reason for a lot of people to file bankruptcy, because medical costs are going through the roof and a lot of the bills are into the thousands of dollars. It is just hard to make that payment every month, so bankruptcy would be a good way to give the person a fresh start.

Should Someone Consider Bankruptcy Because They Are Slowly Falling Behind On Mortgage Payments?

Purchasing a house is probably one of the biggest purchases anybody makes in their lifetime. It is the American dream to own a house, so if someone found themselves getting behind on their mortgage payments and felt they would not be able to catch up because they had to pay medical debt or credit card debt so they cannot pay everything and maintain a mortgage payment and couldn't afford to handle it all, then the best thing to do would be to file bankruptcy and get rid of the medical debt or the credit card debt to be able to afford the home.

If someone does find themselves behind, and are unable to catch up, then filing a chapter 13 bankruptcy would give them an opportunity to catch up on their arrearage of their home as well as getting rid of all of the other unsecured debt like credit card bills and medical debt. It would provide a way to take the overdue payments on the house and put it into a three or five-year repayment plan. At the end of the three to five years, the person would be current on their house payments and they would be pretty much debt free except for their home mortgage, so bankruptcy would help them save their home if they found themselves behind.

Should Someone Consider Bankruptcy If They Are More Than Three Months Behind On Car Payments?

Usually, car lenders will seek to repossess the car once the person falls three to four months behind. Bankruptcy will stop that, because the person could file a chapter 13 bankruptcy and put the car into the plan to be paid off through the bankruptcy, which would be a three to five year repayment plan. Some car loans have very high interest rates, like 20 - 25 percent, and through the chapter 13 bankruptcy, those interest rates could be reduced to 5.25, or maybe even less, so not only would a chapter 13 allow the person to keep their car, but it may also reduce their payment. If the person had the car for over two and a half years, then they may be able to do what is referred to as a cram down; for example if the car was worth $8000, and the person owed $15,000 on it, then through a chapter 13 bankruptcy they would be able to cram that down and just pay back the fair market value of that car. They'd pay about $8000 versus the $15,000, and the interest rate would be about 5.25 percent.

Another way is called the redemption, where the person could just redeem the fair market value of the car and get rid of the balance of the debt through a chapter 7 bankruptcy. There are companies who will finance a person if they do not have the cash up front to pay the fair market value of the car, so they help save the car by more or less refinancing it. The person would be making payments to them for the car so that the car repossession can be stopped, and the car can be saved with a bankruptcy.

Should Someone File For Bankruptcy If They Just Underwent An Expensive Court Trial Or A Lawsuit?

If someone was being sued for a serious matter like a breach of contract or some type of injury, and they ended up losing the suit, then they could end up with a tremendous amount of debt from the judgment against them regarding these matters if they did not have the insurance to cover it. Bankruptcy would stop any type of collection effort for that, as long as there was no fraud involved and it was only based on the person's negligence. Bankruptcy would be a way to discharge that debt so the person would not have to pay it, because otherwise they can garnish the person's wages if they got a judgment against them. They can also put liens on the person's real estate and then it would be an art to get rid of those liens. The person would have to either pay the debt or file bankruptcy to have the liens stripped off, although bankruptcy would protect the person from any type of legal action they were experiencing as far as any type of lawsuit where someone was seeking legal damages from them.

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