The Causes Of Bankruptcy

Bankruptcy is a protective measure which enables debtors to a "start fresh" by eliminating debts in order to become productive again.

By clearing the table of overwhelming debt and high interest rates most debtors are able to take control of their finances and start anew.

One of bankruptcy's most powerful tools is the automatic stay. The automatic stay instantly puts creditors at bay. The automatic stay is the financial equivalent to a restraining order which prevents creditors from taking collection actions. Creditors will no longer be able to call and harass you, file a judgment against you, attempt to repossess any of your property, attach any garnishments to your wages or bank accounts, or anything else that would amount to an attempt to collect debt. This powerful tool against creditors becomes effective the instant you file bankruptcy with the court.

However, the automatic stay has some limitations. Criminal actions cannot be stayed, nor can alimony or child support payments. In cases involving evictions a tenant should file prior to the landlord's action for eviction in order to prevent the eviction.

What Causes Bankruptcy?

There are many circumstances in life that can lead an individual into bankruptcy. Some of the most common causes are:

  • Garnishments
  • Change in income
  • Auto repossessions
  • Unpaid medical bills
  • Divorce
  • Financial hardships
  • High-interest loans
  • Foreclosure
  • Overspending
  • Tax levies

When Is The Right Time To File?

The right time to file really depends on each individual debtor's personal circumstances. When debts become overwhelming, large creditors will begin to take action to collect on the debt such as filing liens, attaching garnishments and destroying your credit score. When these types of situations appear to be imminent, the time to file is now. If the debt seems to be manageable and you can see yourself paying it off within six months, filing bankruptcy may not be in your best interest. Conversely, if debts are at the point where looking ahead six months you would be unable to pay off the debt, even without accruing more debt to that account, then filing bankruptcy should strongly be considered.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.