Filing for Chapter 7 or Chapter 13 bankruptcy protection can be an effective way to reduce or eliminate your debts. Furthermore, it can be a way to keep a Tennessee car, home or other items that you don’t want to be seized or repossessed. There are many common reasons why people get to the point where bankruptcy is their best or only option to get out of a financial hardship.
Unexpected expenses or an untimely job loss
Medical bills are the number one cause of bankruptcy in the United States, and individuals who have insurance are just as vulnerable to extremely large balances as those without coverage. An unexpected job loss can also lead to bankruptcy as many Americans lack an emergency fund or other liquid assets that they can use to avoid falling into debt.
Overspending and being too generous
Spending too much on clothes and other items can quickly result in large credit card balances or a negative checking account balance. Providing money to adult children, a parent or others in need may also result in a lack of savings needed to stay current on bills or weather a financial crisis.
Mortgage payments
A downturn in the housing market can make it harder to justify making your monthly mortgage payment as the home will be worth less than you owe. If you have a mortgage with an adjustable rate, any change in the federal funds rate can cause your housing payment to go up by hundreds per month. The same might be true if you were given an introductory rate that increases after three or five years. Ultimately, you may have no choice but to file for bankruptcy to stop a foreclosure.
Filing for bankruptcy provides you with an automatic stay of creditor collection actions. These actions may include wage garnishment, a lawsuit or seizing property like your home or car. If your debts are discharged, creditors cannot contact you about them even after the stay is lifted, and those who do may be subject to financial penalties.