In the last article, we touched on the consequences of not filing for bankruptcy, which included possibly having your home foreclosed by banks or your car repossessed by the lending company. What's more, the government may garnish your wages if you haven't been paying toward your student loans on time.
Here are a few other bad things you may need to deal with when you don't file personal bankruptcy when you really need to.
IRS Seizures
You've probably seen how the IRS can garnish your wages and seize your bank accounts if you can't pay your taxes. But even if you simply can't keep up with your debt payments and as a result can't pay your taxes, you can still expect a visit from the IRS pretty soon.
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When you declare bankruptcy, the court immediately issues an "automatic stay," which keeps your creditors from getting in touch with you to collect the money you owe them. The automatic stay will also stop any IRS seizure, foreclosure, or repossession in their tracks.
This obviously buys you some time to get your finances in order, but a bankruptcy proceeding can actually help you restructure your debt, helping you get rid of most of it. And depending on your situation (which should be discussed carefully with your bankruptcy attorney), you could also do the same with your federal income taxes.
Lawsuits
When you can't pay your debts on time, you might face a lawsuit down the line. This is usually a credit company's last resort. For instance, a credit card company might compel you to pay sooner by increasing your interest rates and adding fees. When that doesn't work, they may hire a collection agency to harass you until you pay up. But despite all their efforts (and your own), you might still be unable to pay what you owe.
This is where things can get hairy. You might face a lawsuit regarding your financial obligations. Even if you don't respond to the suit, the court might still file a judgment against you. But what happens next depends on the situation -- after all, they can't sue anyone who hasn't any money.
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