When there are money problems, it may seem as if you are falling into a hole you can't get out of. Often times they may think that filing for bankruptcy is their only solution. However, that may not be the case. The truth is, while bankruptcy can help in some situations, it is not always the best choice. There are many things to look at before making such an important decision.
Before deciding to file bankruptcy, you should look at the type of debt you have and your financial situation. There are two types of bankruptcy – Chapter 7 and Chapter 13. While Chapter 7 allows people to walk away debt free, while Chapter 13 allows people to pay off debt over three to five years. Chapter 7 is usually for people who have such a large amount of debt or so little income they simply can't pay it off. According to CreditCards.com more than 50 percent of Chapter 7 bankruptcy cases involve medical bills or health issues. While Chapter 13 is for people who suffered temporary set backs on their finances. Each can help in the right situation – but how do you determine if you need to file bankruptcy and which kind?
Here are five factors to consider before filing bankruptcy:
- Do you have a wage garnishment or foreclosure pending? In a situation where you face losing your house or someone garnishing your paycheck – Chapter 7 bankruptcy may be an option for you. In instances such as these, filing for an emergency bankruptcy can stop that from happening and start the process of rebuilding your finances.
- Are you able to make payments to some of your creditors? If you can handle some of your bills, but need some relief Chapter 13 may be a better option for you. It can give you some breathing space if you have just found a job and need some time to catch up, if you had a change in life that you need some time to adjust to, or simply got in over your head.
- Have you exhausted other options? Many people are eligible for debt settlement programs, where they can negotiate pay off amounts, modify their loans, or make cuts that can help them get back on track. However, if you have little or no income, that may not be an option – in which case, bankruptcy is one way to help.
- What larger assets do you have? In many cases you are allowed to keep personal possessions, such as clothing, electronics, and other items, laws vary from state to state on larger assets such as cars and homes. But filing for bankruptcy does not mean you automatically lose everything.
- Have you sought legal advice? If you are considering filing bankruptcy, it is always best to talk to a lawyer first. Each state handles bankruptcy different and a lawyer can help you through the process, such as fees, requirements, and other legal advice. When dealing with something as important as bankruptcy, it is often best to consult a professional in the field rather than try to deal with those complexities yourself.
While it is best to avoid bankruptcy if you can, it is also sometimes a viable option for a person. If you feel that you are not going to be able to pay off your debt in the next five years on your own, then it is possible that you may want to consider bankruptcy. The time to deal with the financial issues now before it gets even worse. If you are considering filing for bankruptcy, Law Offices of James C. Shields can help you make the decision that is right for you. Contact us and we would be glad to help you consider your options.