Many people struggle financially for months or years before deciding to explore their options in bankruptcy. The last straw often comes in the form of a sheriff or process server showing up at the door with a summons. When this happens, it can be overwhelming.
Faced with a lawsuit, bankruptcy may be your best option. When you consult with our office, we will let you know the pros and cons of bankruptcy.
Pros: Bankruptcy offers relief
Bankruptcies are filed in the United States Bankruptcy Court, making them federal matters. Common collection lawsuits are generally state court matters. Typically, the only issue in the state court lawsuit is, “Do you owe the money?” Unless you don’t owe the money, it is hard to defend such a lawsuit. When you file a bankruptcy in federal court, it overrides the collection lawsuit. In other words, by filing bankruptcy, you are protected from:
- all pending collection judgments;
- wage garnishments;
- bank account garnishments;
- liens on real estate, etc.
All collection lawsuits will stop immediately upon the filing of bankruptcy. Our office will give you advice on how to deal with the lawsuit until you finalize your bankruptcy.
Cons: Negative effects of bankruptcy
If you file bankruptcy, it will leave a mark on your credit report for up to 10 years, affecting your ability to borrow money in the future. Bankruptcy also has fees associated with it:
- attorney fees
- court filing fees
- cost of court-required credit counseling classes
There is additional work involved in preparing for bankruptcy. You’ll have to be prepared to disclose every detail about your financial situation, provide documentation of assets and debt, complete the credit counseling classes, as well as attend a required creditors’ meeting.
If you have a lot of debt and limited income, it is often worth your time to schedule a free consultation with a credible bankruptcy attorney for advice on how to go about dealing with a lawsuit. The attorney should go over your specific situation with you and give you a recommendation on whether filing bankruptcy will benefit you or not. If you decide that the benefits of filing bankruptcy outweigh the negative consequences, you will feel confident that you’ve made an informed decision as you make your move to get out of debt.
Marcia Moellring of Moellring & Ambler, LLC has been representing clients in bankruptcy for 22 years in Illinois and Missouri. To schedule a free consultation, contact us in Hannibal at (573) 221-1788 or in Quincy at (217) 214-3022.