1. Stop a Wage Garnishment.
Wage garnishment hinders the person’s ability to pay their regular monthly bills, such as rent and car payments.
2. Get a Fresh Start.
The person may begin rebuilding their credit within six months of filing bankruptcy. The bankruptcy may end their legal obligation to repay their dis-chargeable debts including: credit cards, medical bills, deficiency balances, payday loans and basically all other unsecured debts other than student loans. They person may also wish to surrender a home or vehicle in the bankruptcy. Certain tax debts may be eligible for discharge.
3. Stop Foreclosure on a House.
A chapter 13 bankruptcy allows the person to bring missed mortgage payments current. If the debtor cannot afford their mortgage payments, they may file a chapter 7 to obtain temporary relief from foreclosure while working out other housing. It rarely makes sense to file bankruptcy simply to save a vehicle from repossession unless the vehicle is essential to the operation of their business such as a wrecker used in a tow truck business.
4. Recover from a Temporary Loss of Employment.
By the time many people regain employment, their credit is already ruined because they fell behind on their minimum payments. In such cases, the creditors demand payment in full or sell their debts to debt collectors. In such cases, these individuals may have nothing to lose from filing bankruptcy.
5. Stop Payments on Student Loan Debt.
A chapter 13 bankruptcy will stop payments on their student loans and allow them to pay down their other debts.
There are other unfortunate reasons to file bankruptcy, but with proper planning and execution, the debtor can successfully manage and/or escape debts legally in the appropriate manner. I suggest you speak to an honest and experienced bankruptcy attorney regarding your situation before filing to avoid unnecessary legal hardships.