Bankruptcy Basics: Should I Declare Bankruptcy?

Bankruptcy is a scary word. Most people think of bankruptcy as something to avoid at all costs. The truth is, if you’re in financial distress, bankruptcy often represents the way out. If you are facing overwhelming debt, you need to evaluate your situation and consider whether bankruptcy might offer you the fresh start that you need. Ask yourself:

Are you using credit cards for necessities?

Are you missing payments and getting further and further in the hole?

Are you in danger of foreclosure?

It’s also helpful to evaluate your net worth. Add up all your assets, including cars, real estate, and savings accounts, and compare the amount to total debt owed. If the value of your assets is exceeded by your debt, it may be wise to consider bankruptcy.

If you are in danger of losing your home or other valuable assets because of debt, or if your life is being made miserable by harassing phone calls, you owe it to yourself to investigate bankruptcy and see if it will provide some improvement for your financial situation.

Most individuals declare either Chapter 7 or Chapter 13 bankruptcy. Let’s talk about the differences.

In a Chapter 7 bankruptcy, your assets can be sold off to pay your debts, but in most cases there aren’t many valuable assets to sell and there is a good likelihood that you won’t lose much property, if any. However, this isn’t a good bankruptcy option if you have a lot of assets that you want to keep.

With a Chapter 13 bankruptcy, you are allowed to pay your debts off over a period of three to five years. A Chapter 13 bankruptcy works best if you have steady dependable income. It often allows you to keep specific assets that are important to you – such as your home.

If you are going to file for bankruptcy, it’s important to act quickly. Quick action, for example, will probably put you in a better position to prevent foreclosure on your house. The exception is when you are actively accumulating huge bills; for instance, when someone in your family is very ill and the hospital bills are mounting up. Your lawyer can advise you on the best timing.

If you’re facing bankruptcy, you’re likely stressed out and scared. We understand, and we can help. Contact us today to discuss your options and determine whether bankruptcy is the best option for your situation.