Summary: If you’re trying to determine if you should file bankruptcy, be sure to consider questions regarding income, length of time, cause of debts, and benefits of bankruptcy.
Deciding whether to file bankruptcy is hard. I hear people say, “I never thought I would be in this position.” If you experienced financial stumbles, ask yourself these questions.
Questions to Consider
Income available to pay debt
- Do you have enough income to pay a significant amount toward your debt each month?
- Can you tighten your belt and reduce the debt significantly each month? If not, filing bankruptcy may be the best choice. Use caution in taking out new loans to consolidate debt. Do not borrow against your home! Don’t liquidate your retirement to pay off medical, credit cards, or personal loans.
Length of time it will take to pay debt off
- If you can pay off the debt using your income, how long will it take you? Develop a written plan. Use a credit card payoff calculator to come up with a time frame.
- No one knows what tomorrow brings. Is your health good?
- How old are you? If you are older and have no retirement savings yet, bankruptcy may be a wise choice.
- How old are your children? If they are in college or approaching college age, will this plan work if you have to fund some college expenses?
Cause of the debt
- What caused the debt?
- Is this likely to happen again?
Weigh benefits of bankruptcy
Filing bankruptcy is one option that can land you on solid ground. Talk through your options with a qualified, experienced bankruptcy attorney. The attorney can help you figure out whether you should file bankruptcy or try to pay off the debt.
Two main types of bankruptcy
Chapter 7 bankruptcy – you must qualify, but filing Chapter 7 bankruptcy will help with unsecured debt, such as medical, credit cards, personal loans, auto loan deficiencies, etc.
Chapter 13 bankruptcy – if you are behind on an essential needed item, such as a house or vehicle, or if your wages are being garnished, filing Chapter 13 bankruptcy can help. If needed, Chapter 13 bankruptcy can be filed on an emergency basis to stop foreclosure or repossession. Chapter 13 bankruptcy is often filed to restructure debt and lower car payments or allow more time for a secured debt to be paid to improve cash flow.
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