For folks who've never filed for bankruptcy before, there is a common assumption that people only do it when they're completely broke. Ask a bankruptcy lawyer when someone ought to file, though, and you'll get a much different answer. Let's look at when a bankruptcy attorney might tell you it's time to petition the court for relief.
You Need to Restructure Your Debts
Restructuring your debts in bankruptcy is often one of the most useful options available. Rather than waiting until you run completely out of money, you can tell the court your finances aren't in great shape and that you need to restructure. Notably, the judge will want to see proof that you can afford to make payments if your debt load is revised. Similarly, you'll have to prove your circumstances are bad enough to justify imposing a reduced set of payments on your creditors.
This sort of bankruptcy proceeding is usually done under Chapter 11 for most businesses and Chapter 13 for most personal finances. There is also a Chapter 12 that is aimed at farms, and some sole proprietorships are eligible for Chapter 13.
Getting a Stay Against Foreclosure
Another useful tool a bankruptcy lawyer may encourage you to use is a stay when a foreclosure on a house is pending. This is a court that compels creditors to halt all collection actions, such as phone calls, emails, texts, and written letters. If you get out in front of the foreclosure process by filing for bankruptcy, you may be able to halt it until the court has time to review your case.
Note that foreclosure only has a chance of letting you keep your house under specific circumstances. You must be filing for a Chapter 13 restructuring plan because secured debts like mortgages are only modified under payment plans. If you seek to liquidate your assets under Chapter 7, the mortgage holding company will have the right to claim the property as collateral against the failed loan.
It may still be worth trying to halt foreclosure if you're going through Chapter 7, though. The logic is that the stay will at least buy you some time to find alternative living arrangements before everything is settled.
Retiring the Debts of Closed Business
Someone shutting down a business may want to retire its debts rather than risk having creditors come after them later. By filing for Chapter 7, you can liquidate all of the business assets and have the debts discharged. This will zero out the company's finances before it ceases operations.
For more information, reach out to a person like James S Price Bankruptcy Attorney.