Do you feel like you’re drowning in debt and struggling to make ends meet month after month? If that’s the case, then you may need to look for a way out of your debt problems. With that in mind, bankruptcy is one of the most effective solutions for getting rid of most of your debt and getting a fresh financial start. However, it may not be the proper fix for everyone.
Remember, filing for bankruptcy is a huge decision that could impact your life for years to come. While it may seem very tempting to declare bankruptcy right away, there are a few questions you should ask yourself before proceeding with your filing. Here, we’ll answer some of the most important questions so that you have the knowledge you need to decide if bankruptcy is the right solution to your financial problems.
Did you exhaust all your other alternatives?
Bankruptcy is a great solution to get rid of most of your debts. However, that doesn’t mean it should be your first option for dealing with the situation. You should make sure you do everything possible to avoid a bankruptcy filing.
For example, according to a bankruptcy lawyer San Diego, you could contact your creditors and try to work out a payment plan. Many lenders would rather forgive part of the debt than have to waive all of it after you file for bankruptcy. Alternatively, you could try to sell some of your assets to pay off your debts or live on a limited budget for some time to do so. Of course, if all else fails, bankruptcy will always be a viable solution.
Can you qualify for bankruptcy?
Although bankruptcy may seem like the perfect solution for you, you must first make sure you qualify for it. For example, if you are looking to file for Chapter 7 bankruptcy, you will have to pass a means test. It’s a way to determine that you can’t pay your debts due to your financial situation. If you pass the means test, you’ll be able to file for Chapter 7 bankruptcy; if you don’t, you’ll have to look for other debt-relief options.
Should your monthly income be below the state median, you will pass the means test automatically. Otherwise, you will have to deduct certain monthly expenses to determine if your disposable income is low enough to qualify for Chapter 7 bankruptcy.
What bankruptcy chapter will you choose?
One of the critical questions you must answer before proceeding with your bankruptcy is the bankruptcy chapter you will file for. The two most common types of bankruptcy are Chapter 7 bankruptcy, also known as “liquidation” or “straight bankruptcy,” and Chapter 13 bankruptcy, often referred to as “wage earner bankruptcy.”
If you want to get rid of your debts quickly and don’t mind losing some of your assets in the process, Chapter 7 bankruptcy may be the ideal option for you. However, if you want to keep all of your assets or cannot qualify for Chapter 7 bankruptcy, Chapter 13 bankruptcy may be a very useful alternative.
If you want to know which type of bankruptcy best fits your specific financial situation, you should talk to an experienced bankruptcy lawyer.
Are there any assets you don’t want to lose?
Filing for bankruptcy might mean that you will have to sell some of your assets to pay off your debts, especially if you file for Chapter 7 bankruptcy. Therefore, you should ask yourself if you have any assets you wouldn’t want to lose during your bankruptcy filing.
Even if the answer is yes, it may not imply that you must sell those important assets to get rid of your debts. Before you file for bankruptcy, you will be able to exempt some of your property from the process. Your exempt assets won’t be affected by bankruptcy proceedings, which means you won’t have to sell them at any point.
Some assets usually exempt from bankruptcy are your house and car, up to a specific value, household goods, furniture, your salary, among others. However, keep in mind that if you own non-exempt assets, such as art or coin collections, jewelry, luxury items, and the like, they could be sold during your bankruptcy.
Can you afford to file for bankruptcy?
It may seem like an odd question, but it’s actually essential. Bankruptcy can help you reorganize your financial situation, but it is not free. For example, a Chapter 7 bankruptcy filing could cost you around $340, and a Chapter 13 bankruptcy filing may cost up to $310.
Furthermore, you should also consider your bankruptcy attorney’s fees and the cost of mandatory credit counseling courses. If you lack the funds, you can try to raise the money, work out a payment plan with the attorney or find an attorney who will take your case pro-bono (free of charge).
Are you ready for the aftermath?
Bankruptcy is a powerful solution to get rid of your debts, but it will leave a lasting impact on your life. For example, Chapter 7 bankruptcy will stay on your credit report for ten years, while Chapter 13 bankruptcy will remain on it for seven years. During this time, it may be much more difficult to obtain loans or qualify for credit cards.
You will have to rethink the way you manage your finances. If you are willing to pay that price, then bankruptcy may be the right choice.
Do you need a bankruptcy attorney?
Technically, you can file for bankruptcy without the help of an attorney. However, it may not be a wise decision. Keep in mind that if you make any mistakes during the process, it could hurt your chances of getting the debt discharge you need. Besides, bankruptcy is not simple. If you are unfamiliar with the process, you will have a hard time navigating through it.
Therefore, working with an experienced bankruptcy attorney, such as KT Bankruptcy Lawyer, might be just what you need to get the results you’re looking for.
Before you hire an attorney, be sure to contact them for a free consultation. They will answer any questions you have about bankruptcy and advise you on what to do depending on your financial situation.