Should I file for bankruptcy? I wish I had a nickel for every time that I have been asked this question. I know the thought of filing for bankruptcy can be scary. The word "bankruptcy" often carries many negative connotations, and the thought of filing for bankruptcy can cause a person to experience many different emotions. For many people, filing for bankruptcy can provide them with a fresh financial start. However, it is difficult to see the positive side of filing for bankruptcy when the bills are piled up in front of you, the checking account is empty and payday is a week away and you have just been served with a lawsuit. This is where you need to take a step back and admit that you need a fresh outlook on this problem.
Whether bankruptcy is right for you depends on a variety of factors. If you're considering bankruptcy, the best thing you can do is speak with an experienced bankruptcy attorney. They will look over your case and help determine if bankruptcy is right for you. Remember, that not everyone who walks through our doors files for bankruptcy. There may be other non-bankruptcy options for you to explore. Here are a few things to consider before filing for bankruptcy:
Will Bankruptcy Help Me?
Evaluate all of your options prior to filing for bankruptcy, and think about the goals you want to achieve by filing. Not all debts will be eliminated through a bankruptcy discharge, and bankruptcy may not be the best option if all you want to do is wipe out the debts that cannot be discharged (such as student loans). Sometimes, creditors are willing to work with debtors, a person who files for bankruptcy, to settle their debts. If you're able to resolve your debts with your creditors, you may not need to file for bankruptcy.
Qualifying for Bankruptcy
Chapter 7 and Chapter 13 are the two forms of bankruptcy that almost all individuals file. Both chapters have certain eligibility requirements. To qualify for Chapter 7, you must be able to pass the bankruptcy means test. You may not be able to file for Chapter 7 if you have enough income to repay your debts. In this case, you would need to file Chapter 13 bankruptcy. For Chapter 13, your debts must not exceed a certain dollar amount. An experienced bankruptcy attorney will help you determine whether you qualify for Chapter 7 or Chapter 13.
Home and Property
Filing for bankruptcy won't relieve you of your obligation to pay your mortgage, but it can make it easier for you to pay your mortgage because you'll be getting rid of other dischargeable debts. How much of your property you'll be able to keep depends on which type of bankruptcy you file, whether you've pledged the property as collateral for a debt and exemption laws in your state. Again, the experience of your attorney will be extremely valuable here.
Additionally, bankruptcy will impact your credit score. Anyone who tells you differently is not telling the truth. The effect bankruptcy will have on your credit score depends on many factors, including how good your credit score was prior to filing for bankruptcy. If you were delinquent on many accounts and your credit score was already low, it's likely that your score will take a modest dip. However, if you had good credit before filing, your credit score might take a much bigger hit.
Bankruptcy is paper-intensive, and therefore, can be intrusive and a burden on you and your family. When you file for bankruptcy, you're required to disclose every detail of your finances, and there is a chance that other people will find out that you're filing for bankruptcy. Bankruptcy is nothing to be embarrassed about, but some people aren't comfortable with other people knowing about their bankruptcy. In Chapter 7, you could choose to forfeit property or surrender a car or a home. Trust me, your neighbors will notice when you get a different car or move out. In a Chapter 13 case, you are committing to a three to a five-year repayment plan. So, the answer is Yes, it will be a bit of a lifestyle change.
Making the decision to file for bankruptcy can be difficult as there are many factors to consider. Before filing for bankruptcy, it's important to meet with an experienced bankruptcy attorney. They'll be able to help you decide if bankruptcy is right for you and which factors need to be taken into consideration. They should be able to answer all of your questions. Most importantly, you will need to focus on the future and not on the details of the bankruptcy filing. If you get caught in the details of the filing, you will never be able to see the bigger picture of where you can be after you take care of the debts.