Should I File For Chapter 7 Bankruptcy?
One of the most common questions bankruptcy lawyers get asked is whether they think a potential client should file for Chapter 7 bankruptcy. Since we get asked this quite often, we preface our guide by saying everyone’s financial circumstance are different. We can’t really provide insight to you without and understanding of your specific financial circumstances. That requires a phone call to our office, so we encourage you to do so and we do offer free initial consultations. That being said, check out some general guidelines to consider in determining whether you should file for bankruptcy or not.
Are Your Financial Circumstances Impacting Your Emotional Well Being?
Are you dealing with incessant collection calls, garnishment or other aggressive collection practices? We know first hand that can cause serious emotional damage to people and seriously impact their ability to succeed in life and pay back those very debts. It can be a vicious cycle of working as hard as you can only to be knocked down by the overwhelming collections. Even if you are working as hard as possible, when you have your wages garnished by creditors, can’t stop collection calls, and need to continue to pay to maintain your driver’s license or utilities – fighting back can be nearly impossible. Many well intentioned people want to repair their finances but it seems like they are going to work forever and never get out. If you’ve been fighting against these collection practices and working your hardest to keep up but simply are at your wit’s end to address the challenge, you should consider filing for bankruptcy and resolve the debts so you can move forward. Having a fresh start while keeping the hard work ethic that you know you have without the negativity of the collection practices can be what you need to start fresh on the road to success.
Are You Considering Bankruptcy Due to a Health Crisis or Catastrophe?
We see many unfortunate cases where people are unexpectedly injured or encounter health difficulties. They may not have adequate disability or health insurance coverage or insurance at all. If they are unable to work and have to cover mounting bills or expenses, it can significantly.
Are You Committed to Learning Financial Management Habits?
Not only is credit counseling a requirement of filing bankruptcy, but its also important to utilize the bankruptcy process as a wake up call and to learn and commit to better financial habits. You won’t be able to file bankruptcy for a long time after you file the first time so if you don’t correct the problems that got you into the circumstances leading you to your bankruptcy., it could be very difficult if you end up there again before you are able to file bankruptcy. That’s why one of the things you must consider if you’re asking whether you should file bankruptcy is whether you are committed to changing the behaviors that contributed to your financial conditions.
Do You Own High Value Assets or Property?
Sometimes people might have a lot of assets or property but not necessarily a lot of cash on hand to pay creditors or the means to do so. Just because you have valuable property doesn’t mean you are able to come up with the cash to pay the debts you owe. Sometimes people with assets still file bankruptcy. Say you have a second property or something that you inherited or a valuable heirloom or collectible, for example. If that sounds like you, strongly consider the implications if you file Chapter 7. Chapter 7 bankruptcies are liquidations. That means that all of your non-exempt property under State law is subject to liquidation to satisfy your creditors. If you have little cash on hand to pay debts but some valuable assets or collectibles that aren’t producing cash flow but still have value, you could lose that property and the filing of bankruptcy will trigger a liquidation of that problem to satisfy your debts. A rule of thumb is to consult with a bankruptcy attorney in your State to take inventory of your property to understand what might be exempt and what might be subject to liquidation if you file. Bankruptcy property exemptions are based on State law so you’ll need to make sure the attorney you speak with is also licensed in the State which you reside and would ultimately file bankruptcy if you did so.
Do You Have Significant Amounts of Debt and Low Monthly Income?
For people with extensive credit card debt, medical bills, personal loans, civil judgments, past-due rent, past-due bills, or business debts that are struggling to repay should consider filing bankruptcy. This is particularly true if you have low monthly income compared to the debt that you owe. Your monthly income earning capacity is a major factor to consider when determining if you should file for bankruptcy. This is much of the focus of your initial meetings with a bankruptcy attorney because you must qualify under the means test in order to be eligible for Chapter 7 bankruptcy. If it turns out you are not eligible, you should understand that your bankruptcy may be turned into a Chapter 13 bankruptcy. Monthly income also plays another role in the decision to file bankruptcy. If you have a monthly income and it is sufficient to help you stay on your feet once the bankruptcy is over, then bankruptcy might make sense. So if you are someone who does earn a monthly income, qualifies under means testing but just have such a large debt load that you cannot keep up, speak with a bankruptcy attorney about your options.