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 Considering Bankruptcy Due to a Health Crisis or Catastrophe?
Are You Committed to Learning Financial Management Habits?
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.