Should I File Bankruptcy?

Have you and your spouse been sitting around the kitchen table mulling the “should I file bankruptcy” question? If so, here are some keys to simplify your thought process:

1. Don’t make the “should I file bankruptcy?” decision on your own.

Attorneys, family members, and even other debtors who have been through bankruptcy can be great sources of inspiration, knowledge, and referrals. Perhaps you know a friend or relative who has filed bankruptcy and may be open to sharing their experience with you. Often consulting with family members can generate new ideas about how best to deal with your financial troubles that you hadn’t previously considered. Don’t be embarrased by your problems, you’d be amazed to see the benefit of putting them out in the open. In today’s troubled economy, there are quite a few people navigating the same stormy waters that you now find yourself in. Obviously, when seeking advice, not everyone’s opinion should be weighted equally. A random thought from an uncle in the food industry, for instance, shouldn’t be given the same “heft” as the personal advice you get from a credential bankruptcy attorney. Some attorneys on this forum would also recommend taking suggestions from supposed “financial experts” like Dave Ramsey with a grain of salt. Triangulate your resources (i.e. use various resources as checks and balances against one another) and educate yourself about the process. Bankruptcy laws differ from state to state, so be aware of the regulations and parameters that apply. For instance, will you pass the state “means test” to qualify for Chapter 7 bankruptcy, or can you only qualify for Chapter 13 bankruptcy? Speak with a bankruptcy attorney to discuss the details of your situation, most offer free initial consultations.

2. Don’t dwell on doomsday scenarios.

Remember, bankruptcy can be a positive thing. Unfortunately, the word “bankruptcy” has taken on an unfortunate connotation in our culture. Bankruptcy is a remedy—it is not a “giving up” of your finances or future. It will be possible to access credit after you’ve filed. So when that little voice inside your head yells “no, no, no, no!” when you ask yourself “should I file bankruptcy?” consciously remember that bankruptcy is simply a legal means to resolve financial woes—it’s not intended to complicate them or make them worse. As long as you are open and truthful with the Court, bankruptcy can offer tremendous relief from what may seem like an impossible situation.

3. Ask some tough questions.

After you have consulted with friends, family and experts perhaps you now see a way out of debt that doesn’t involve bankruptcy. If no solution is forthcoming, consider the effect that your debt is currently having on your life. Are your relationships suffering as a result of arguments or stress about money? Are you unable to make minimum monthly payments on credit cards? Can you make a mortgage payment or a credit card payment but not both? Do you have less than three months savings in the bank in case of an emergency? Are you paying 30 percent or more of your income to creditors each month?

Every situation is unique, but if you find yourself being affected by some of the circumstances described above, it may be time to consider filing for bankruptcy. Here are two theoretical examples in which filing for bankruptcy may make sense.

A) A newlywed bride finds herself suddenly crippled by medical bills incurred after a car accident. She may strongly want to consider filing Chapter 7, since doing so may help her discharge her unsecured medical debts; and since she and her husband are young and have few assets, they have many years to recover from bankruptcy.

B) A homeowner with a steady income stream makes a bad investment and suddenly finds himself on the brink of foreclosure. He cannot afford to pay back all past due mortgage payments but given time could once again start making normal mortgage payments. He could explore filing for Chapter 13 bankruptcy to try save his house and structure repayment plans with creditors.

If you’re going to take away one lesson from this post, let it be this: don’t keep your problems in the dark. There is help available, if debt is causing problems in your life, talk to an attorney to learn more about your options.