The holiday season can be very stressful for those who live with debt.  For some, bankruptcy seems like the answer, but the negative stigma of the word can have some people denying the need for bankruptcy, even in dire situations.

Despite its negative stigma, filing for bankruptcy can be very beneficial for some people. Bankruptcy can completely wipe out some debt, while also preventing collectors from garnishing your wages or taking your home. Naturally, this decision comes at a price that affects more than your wallet, so be careful to determine whether bankruptcy is right for you.

DETERMINING BANKRUPTCY NEED- THE TWO YEAR RULE

When determining whether you should file for bankruptcy, it may help to explore the two year rule. First, calculate the total amount of dischargeable debt that you currently owe to creditors. Then, divide that amount by 24 months, or 2 years, to get a monthly estimate of what you will owe. Can you afford these monthly payments? If the answer is no, ask yourself whether you can afford the damage this debt will inflict on your credit report if you continue to lug it around.

AVOIDING FORECLOSURE

If your home is at risk of foreclosure, you may want to compare the pros and cons of filing for bankruptcy instead of losing your home. If you have built a substantial equity on the house, it may be worth saving through bankruptcy. Even if you have already received your foreclosure notice, you still may have time to file for bankruptcy to avoid losing your home. Be sure to remember that even if you file for bankruptcy, you will still be responsible for the missed payments. Calculate whether these payments will send you back into another financially inadequate situation. If the answer is yes, it could make sense to let the house go.

IF YOU’VE BEEN SERVED

The most important thing to do when you’ve been served papers at your door is to call Sam Henry Law and have an attorney guide you on how to answer properly. Many people choose to ignore the lawsuit, presumably because they know they are in debt, but doing nothing is one of the worst things you can do. By failing to appear, you’ll receive a default judgement that legally grants creditors permission to garnish your wages and/or put a lien on your house.