How to Decide Whether Bankruptcy is Right For You
By Brenner Spiller & Archer, LLP | April 3, 2017
Though mostly used as a last result, bankruptcy can be a helpful strategy to escape insurmountable debt. It gives those in debt a new lease on life and more control over their financial situation. Still, not all situations are created equal – though debt may seem inescapable, bankruptcy may not always be the answer. Here are some factors to consider before going through with bankruptcy:
Assess Your Situation
Take a hard look at your finances as well as your income. In some cases, a simple budget and a solid plan can help lighten the load of seemingly insurmountable debt. It can also help to simply talk to your creditors and let them know that your financial situation has changed. Remember: they want their money, too. In most cases, they can work with you if you work with them – try to negotiate a payment arrangement or see about settlements.
Know Which Debts Will and Won’t Be Canceled
Bankruptcy can clear a substantial amount of debt, but it rarely cancels everything. Alimony, child support, and criminal restitutions do not qualify for a bankruptcy discharge. If either of these are the primary reason you are considering bankruptcy, it’s worth taking into account that they will not be discharged and you should evaluate your financial burdens without these in mind.
Consider Your Cosigner
If you have any debts that relied on a cosigner for approval, your bankruptcy may affect their credit. Particularly with Chapter 7 bankruptcy where you’re absolved of your part of the debt, but the co-signer is still financially responsible for the entire debt.
Chapter 7 vs. Chapter 13
“Bankruptcy” is used as a blanket term though really, the two most common types are Chapter 7 and Chapter 13. While both have their intricacies that set them apart from each other, they can be boiled down to the following concepts: Chapter 13 bankruptcy is basically a payment arrangement option in which you use your income to pay down debt in a set amount of time up to five years. Chapter 7, the most common, is the bankruptcy option that strives to cancel most debts altogether and start fresh.
Make Sure You Qualify
After deciding which bankruptcy is right for you, take the time to make sure you qualify. Both chapter 13 and 7 bankruptcies have their own set list of requirements.
This could take into account your current income, the value of any assets you may own, and of course, the amount of debt you’re in.
Eligibility can be trickiest part of bankruptcy. You may be left with all sorts of questions regarding the qualifications. We’re here to help! If you or a loved one is looking for financial relief and are considering bankruptcy, but don’t know where to start, let our experienced and knowledgeable attorneys help. Contact Brenner, Brenner & Spiller today to schedule your consultation.