Is Bankruptcy Right for Me?

How Do I know if Bankruptcy is right for me?

Filing for bankruptcy is a serious choice that should not be taken lightly. However, in some cases, bankruptcy can be a saving grace – an option that could make the creditors stop calling, save your home, return your life to normalcy, and give you a clean financial slate. While bankruptcy does have negative consequences, filing for bankruptcy can be the optimal decision for some families in specific situations. According to the American Bankruptcy Institute, 1.1 million Americans filed for bankruptcy in 2008.

How do you know if bankruptcy could be the best option for you?

Paying off your unsecured debts is unrealistic. Take stock of your income, your expenses, your secured debt (home and car payments) and your unsecured debt (student loans, medical bills, or credit card bills). If paying off your unsecured debts is not possible even in the long run considering your income, bankruptcy may be the best choice for you. This can often be the case if a person has faced a medical emergency, business failure, job loss or a divorce. In many cases, if you cannot make your minimum payments and cannot foresee being able to make payments in the future, bankruptcy may be the right option.

You are facing a foreclosure. If you are in danger of losing your house to foreclosure, declaring bankruptcy can prevent a foreclosure or delay the foreclosure process. Both Chapter 7 and Chapter 13 bankruptcies come with a court-ordered automatic stay that will instantly delay a foreclosure sale. Furthermore, if you have an existing income, a Chapter 13 bankruptcy will create a repayment plan for your mortgage in which you can repay the arrearages on your mortgage over the life of the bankruptcy plan which is three to five years.

You are being harassed by creditors and the repo man. Being in debt can mean receiving dozen of phone calls a day from creditors or the constant fear that your car will be repossessed, leaving you without transportation to work. In many cases, the overwhelming stress and worry caused by unrelenting daily harassment is much worse that declaring bankruptcy and starting over.

You have been affected by a life event such as a medical emergency, divorce, layoff or business failure. In many cases, those declaring bankruptcy are not fiscally irresponsible and are not seeking escape from years of irresponsible financial decisions. Rather, their life has been affected by a financially devastating event that leaves them unable to get back on their feet. A family facing overwhelming bills for cancer treatment for an uninsured child may never have the money to pay back the hundreds of thousands of dollars of medical bills. A family who put everything they had into a new business may not have a place to turn if their business fails.  Many families who lead financially stable lives before a divorce find their incomes and savings unable to support separate households after a divorce.

You are suffering due to wage garnishments. If a court has ordered your employer to garnish your wages to pay off debts, it can become very difficult to continue paying for necessities and living a normal life. Filing for bankruptcy will stop wage garnishment altogether with the exception of child support or spousal support payments.

When considering bankruptcy, it is vital to remember that no two families are the same and no two debt situations are the same. The best way to find out if filing for bankruptcy is the best option for you and your family is to talk to an experienced bankruptcy lawyer about your individual case and your individual needs.