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Is Bankruptcy the Correct Choice for You?

By plrprousers | January 21, 2009

Current economic circumstances are making a lot of individuals who have never before considered filing bankruptcy to now consider it as a potential answer to their financial difficulties. The problem is that not everyone can be helped by filing bankruptcy.  So, if you’re one of those individuals who has never, until recently, given thought to filing bankruptcy, you need to know whether bankruptcy will assist you or not.

Should You Even Be Thinking About Filing Bankruptcy?

As funny as it sounds, there’s no generic test you can take to determine whether bankruptcy is proper for you.  You don’t need a specific level of debt.  You don’t need to earn less than a specific sum of money. And, you don’t even need to be in arrears in payments to your creditors.

Bankruptcy isn’t a decision you make by marking off boxes on a flow chart.  Bankruptcy is a personal decision.  But, it’s a individual decision that’s based on particular  factors in your life.  They are some of the things you need to consider before deciding one way or the other about bankruptcy.

1. Are you in financial distress?  You may be in financial distress if you’re having trouble paying the minimum payments on your credit cards.  And, if you’re scarcely able to keep necessaries like food, clothing and shelter you’re likely in financial trouble.

2. Do you live paycheck to paycheck?  If you had even a moderate health issue, would it put you in a financial crisis?

3. Are you judgment proof?  Put differently, do you have no assets that can be seized and sold to pay off your liabilities? You may not need to file bankruptcy if you’re judgment proof.  Then again, judgments do stay around for a while.  Each state’s judgment rules vary on exactly how long a judgment can hang around.  But, what you need to look at is that your present-day bad situation may, and probably will, get better in the future.  If it does, those judgments that were of no interest during your financial trouble will interest you because you could face the seizure of your future assets.  Most lawyers will give you a free bankruptcy consultation.  You should use it to talk about this particular issue.

4. Are creditors and collection agencies harrassing you?  Bankruptcy is one alternative to halt that harassment.  But, you can also halt it with a letter writing campaign under the federal Fair Debt Collection Practices Act and miscellaneous state law fair debt collection laws.   But, bankruptcy is in all probability the best choice if you’re getting harrassed and you’re in financial distress (see #1).

5.  Are you looking at foreclosure? You’ll be able to block a foreclosure by filing a Chapter 13 bankruptcy.  Chapter 13 lets you to restructure your debts and pay your mortgage arrearage over time.

Will Bankruptcy Help You?

Bankruptcy won’t give you more income. So, if you don’t earn enough money to support your life-style, bankruptcy isn’t your answer.  You either need to lower your expenses or increase your income.  You may even need to do both.  But, you don’t need to file personal bankruptcy.

Bankruptcy also won’t help if your main debts are non-dischargeable debts. Bankruptcy law defines those debts that are dischargeable and those that are not.  The following is a concise listing of many non-dischargeable debts in a Chapter 7 Bankruptcy under current bankruptcy laws.

* Recent taxes and government penalties
* Child support
* Criminal fines or court ordered restitution
* Personal injury awards where the debtor was intoxicated at the time of the incident
* Debts that aren’t listed in the bankruptcy filing schedule
* Student loans (there are exceptions but it’s virtually impossible to meet the requirements for them.  So, it’s best to construe student loans as non-dischargeable)
* Debts that were part of a preexisting bankruptcy case but weren’t discharged

Final Considerations for Personal Bankruptcy

Deciding whether to file bankruptcy isn’t an simple decision.  But, it’s a decision you’ll be able to make if you take a reasoned out and well-balanced approach to it.  As part of your consideration, you’ll need to weigh your emotions, your background, your religious beliefs and your values.  So, consider the following:

1. Do your own research.  Discover everything you can about bankruptcy.  A fantastic resource for educating yourself on bankruptcy law is the book The New Banktruptcy:  Will It Work for You?

2. Keep your future in mind. Consider of how you’ll feel when the case is all over and you’re out from under a pile of debt.  How will you feel about yourself in 6 months or a year?  Will you be pleased with your choice to either file bankruptcy or not file bankruptcy?

3. Find the right bankruptcy attorney for you.  A phenomenal place to find bankruptcy attorneys in your region is Legal Match.  Virtually all bankruptcy attorneys will give you a free bankruptcy consultation.  Use that free consultation to question the lawyer.  But, when you start interviewing bankruptcy attorneys, don’t base your ultimate hiring decision entirely on price.  It will be enticing to hire the most inexpensive. After all, you’re in a financial crisis so the more inexpensive the better, right?  That’s not always the case.  Interview the lawyer first.  Be sure you’re a good match with that attorney.  Your bankruptcy lawyer will be working for you so you need to be comfortable with the whole approach to your case.  You need to feel good about the interactions you have with the lawyer and staff.  You want a bankruptcy lawyer who will assist you through this crisis in a positive way.  You don’t want to feel judgment or disapproval from either the lawyer or the staff.

4.  Filing bankruptcy is a moral decision.  Don’t kid yourself into believing it’s not.  But, you do have to make the decision that’s best for you and your household.  So ask yourself:  “Is it more honorable to fight a losing financial struggle that puts your family’s future at risk in an attempt to pay back old debt?”  Or, is it more respectable to admit you did your best, you couldn’t make it work and you need a clean start that will allow you to devote your personal time and effort into activities that will more positively bear on your family’s future?”

Only you can answer that question.  Take your time.  Make the right decision for you and your family.  Once you’ve come to that decision, trust in your ability to make the correct choice.  Then, go ahead knowing that your financial crisis will shortly give way.

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