Struggling to stay on top of debt and pay bills on time is stressful and overwhelming. For some individuals, filing for bankruptcy offers a fresh financial start. A lawyer can provide you with personalized guidance on whether this is the right option for you, but here are a few common situations where bankruptcy may be the best solution. 

Signs That Bankruptcy May Be the Right Choice

1. Facing Collections & Judgements

Once an account is sent to collections, it is common for creditors to persistently call debtors in an effort to collect. Even when a person can't afford to pay, the harassment continues, causing an increase in stress and worry. When left unresolved, the creditor can also take the debt to court. If the creditor earns a judgment against the borrower, they can garnish their wages until the debt is paid. 

Such a scenario makes a challenging financial situation worse and can make it hard to cover basic necessities, like food and electric bills. Filing for bankruptcy halts these proceedings. Once the paperwork is filed with the court, all creditors are contacted and must instantly cease contact with the individual. All garnishments are also temporarily stopped.

2. Plummeting Credit Score 

Credit ratings impact multiple areas of life, from housing lease approval to employment opportunities. Increasing debt amounts, late payments, and collection accounts can all cause scores to plummet. While bankruptcy will likely cause a drop in scores, those scores should begin rising soon after as a person is no longer late on payments or associated with increasing debt levels. The sooner bankruptcy is filed, the less a person has to do to begin improving their score. 

3. Falling Behind on Mortgage

Missing home loan payments can cause the lender to begin foreclosure proceedings. As long as an auction hasn't happened yet, a lawyer should be able to help stop the process by filing the bankruptcy documentation. With Chapter 7 bankruptcy, Ohio residents can exempt up to $145,425 in property equity from the liquidation process. This makes it possible to keep the home while erasing secured debts like credit cards and medical bills. Any behind payments must be caught up at the time of discharge. 

If the home is valued more than the allotted exemption, or if it's not feasible to cover the past-due amounts upfront, a Chapter 13 bankruptcy may be a better fit. Filers can catch up on arrears over their repayment period—three to five years—while continuing to pay normally on the mortgage. This allows them to keep the property and catch up without creating a financial burden. 

When debt becomes impossible to tackle, residents of Northern Ohio turn to Riley, Resar & Associates, P.L.L. in Lorain County, OH. With nearly 30 years of experience, this local law firm offers valuable insight into bankruptcy law and works with you through every step of the process. Find out how they can assist you today by going online or by booking a consultation at (440) 244-5214.