Should I File Bankruptcy?

If you are asking yourself this question, you are not alone. The path to debt relief is not as long or as lonely as you might think. Every year thousands of people across the State file bankruptcy. Everyone’s financial situation is different. This article discusses some common issues our clients face when filing bankruptcy.

If you are dealing with any of the following issues you may consider speaking to a bankruptcy lawyer.

• You have a wage garnishment that prevents you from affording your regular monthly expenses such as rent, utilities, and car payments.
• You are relying on credit cards to meet basic monthly expenses such as groceries and gas.
• Your credit cards are maxed out and you can only afford the minimum payments.
• You fell behind on your mortgage, but you now have the ability to resume regular monthly payments and want to keep your home.
• You are living month-to-month and unsecured debt payments (credit cards, personal loans, medical, etc) account for 25% or more of your monthly expenses.
• You are ineligible to qualify for new loans or credit cards because your debt to income ratio is too high or because you could not afford any more debt payments.
• You suffered a loss of income and fell behind on payments to your creditors. Your creditors have accelerated your accounts and will not allow you to catch up on payments.
• You have significant medical debt and it will take two years or more to pay it off.
• You are considering cashing out your retirement (401k) to pay-off some debts.
• You are going through a divorce and the loss of a dual income household will have significant impact on your ability to service your debts.

If you are facing any of the above issues, you may want to consider your options under the bankruptcy code. Many individuals spend months and even years struggling to get out of debt before finally resorting to bankruptcy. This is because of misconceptions about the impact of bankruptcy. The only true downside to filing bankruptcy is that it will make it difficult to qualify for new unsecured loans and credit cards in the future.  There is no sense in maintaining a good credit score if you are unable to take on new debt.

After filing bankruptcy, you can start rebuilding credit right away. You will have difficultly qualifying for new credit cards for approximately two years. In the meantime, you may consider secured credit cards as a means to rebuild credit. If you are regularly employed, there are several honest and fair auto dealerships with special financing available to bankruptcy filers. If you are considering purchasing a home in the future, you will have to wait two years to qualify for most home loans. If you have student loans, the loans will not be discharged in bankruptcy. Speak with a bankruptcy attorney who understands the different options available to student loan borrowers.