Is Bankruptcy the Right Option for You?

Current economic conditions are causing a lot of people who have never before thought about filing bankruptcy to now view it as a potential solution to their financial problems. 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 help you or not.

Should You Even Be Considering Filing Bankruptcy?

As crazy as it sounds, there's no general test you can take to discover whether bankruptcy is appropriate for you.  You don't need a particular level of debt.  You don't need to make less than a certain amount 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 checking off boxes on a flow chart.  Bankruptcy is a individual decision.  But, it's a individual decision that's founded on specific  factors in your life.  They are some of the things you need to look at 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 difficulty paying the minimum payments on your credit cards.  And, if you're scarcely able to keep necessaries like food, clothing and shelter you're probably in financial distress.

2. Do you live paycheck to paycheck?  If you had even a moderate health problem, would it place 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 stick around for a while.  Each state's judgment rules vary on exactly how long a judgment can hang around.  But, what you need to consider is that your current bad situation may, and in all likelihood will, get better in the future.  If it does, those judgments that were of no interest during your financial crisis will concern 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 discuss this particular issue.

4. Are creditors and collection agents harrassing you?  Bankruptcy is one choice to end that harassment.  But, you may also halt it with a letter writing campaign under the federal Fair Debt Collection Practices Act and associated state law fair debt collection laws.   But, bankruptcy is in all likelihood the easiest choice if you're getting harrassed and you're in financial distress (see #1).

5.  Are you facing foreclosure? You'll be able to block a foreclosure by filing a Chapter 13 bankruptcy.  Chapter 13 allows 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 lifestyle, bankruptcy isn't your solution.  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 big debts are non-dischargeable debts. Bankruptcy law defines those debts that are dischargeable and those that are not.  The following is a concise list of several 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 almost impossible to meet the prerequisites for them.  So, it's better to view student loans as non-dischargeable)
* Debts that were part of a preexisting bankruptcy case but weren't discharged

Concluding Considerations for Personal Bankruptcy

Making Up One's Mind whether to file bankruptcy isn't an simple decision.  But, it's a decision you'll be able to make if you adopt a reasoned and well-balanced approach to it.  As part of your consideration, you'll need to weigh your emotions, your background, your spiritual beliefs and your values.  So, consider the following:

1. Do your own research.  Read everything you can about bankruptcy.  A wonderful resource for training 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 mass 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 good spot to find bankruptcy attorneys in your area 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 begin interviewing bankruptcy attorneys, don't base your ultimate hiring decision totally on fee.  It will be tempting to employ the most low-priced. After all, you're in a financial crisis so the cheaper 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 general 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 mode.  You don't want to feel judgment or disfavor from either the lawyer or the staff.

4.  Filing bankruptcy is a moral decision.  Don't kid yourself into thinking it's not.  But, you do have to make the decision that's best for you and your family.  So ask yourself:  "Is it more honorable to push a losing financial battle that puts your family's future at risk in an effort to pay back old debt?"  Or, is it more honorable to recognize 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 than positively affect your family's future?"

Only you can answer that question.  Take your time.  Make the proper decision for you and your household.  Once you've reached that decision, trust in your ability to make the proper choice.  Then, move ahead knowing that your financial troubles will soon blow over.