Key Things You Should Know Before Filing for Bankruptcy

Living in a debt economy has become the norm for many individuals who are now struggling to make ends meet. Miss a payment on a credit card and the high-interest rates kick in, triggering an unsustainable downward spiral, one of robbing Peter to pay Paul.

Yet we continue to be inundated with credit card offers from all directions, from the mailbox to the checkout register to online buying; the allure of "better rates" is a constant temptation--becoming over-extended is just one small step over the line. But, no matter how you got to this point, this may be where you contact a bankruptcy-qualified attorney with the Law Offices of James C. Shields and discuss your debt-relief options, including filing for bankruptcy.

Ask yourself these questions:

  • Are you only making minimum payments?
  • Have your accounts been placed with a collection agency?
  • Do you feel at a loss when it comes to your finances?
  • Are you "floating" necessities on your credit cards?
  • Do you know what your total debt is?
  • Have you looked into debt consolidation?

If you've replied "yes" to more than one of these questions, then consulting with a bankruptcy attorney is in order.

Before Filing for Bankruptcy, Assess Your Overall Situation

  1. One of the first orders of business is to take stock of what you own. This would include real estate, 401k, vehicles, boats, motorcycles, RVs, stocks, bonds, other retirement funds, fine jewelry, college accounts, and any other assets that can be liquidated quickly.
  2. Add up your debt, discounting any Student Loan Debt.
    • Student loan debt is one of the few debts that cannot be discharged under current bankruptcy laws--Congress wrote this caveat into bankruptcy laws to "prevent moral hazard".(1)

If your debt outweighs your assets, you simply can't sustain; it may be time to consider bankruptcy as a viable solution. However, keep in mind that bankruptcy has long-term effects; scarring your credit history for the next 10 years is one--there may be other options to consider.

Chapter 7, Chapter 11 & Chapter 13 Bankruptcy

People file for bankruptcy for various reasons: overwhelming medical expenses, unemployment, over-extended credit, or divorce. There are several chapters of bankruptcy available, each one serving a specific purpose. The three most common ones are:

  • Chapter 7 Bankruptcy - the straight bankruptcy
    • Chapter 7 bankruptcy liquidates all assets to pay off as many creditors as possible, offering a quick, fresh start. This does not come without an emotional price tag as you may have to surrender your treasured property.
  • Chapter 11 Bankruptcy
    • Corporations that require time to restructure their business affairs, debts and assets typically file Chapter 11 under a plan of reorganization.
  • Chapter 13 Bankruptcy, a reorganization bankruptcy for individuals, may be the preferred choice for those who have property they wish to keep.

Once a bankruptcy has been entered into the courts, notices are sent to all creditors and they must stop harassing the debtor; you could be doing yourself a great injustice by not filing for bankruptcy. (2) However, with the assistance of a skilled attorney, this action could get you back on solid ground.

There may be other options vs. filing bankruptcy worthy of consideration. Contact the Law Offices of James C. Shields and find out how they help people who cannot pay their debts; their staff is very knowledgeable and can provide you the information you need to consider all your options.

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