Is Bankruptcy the Right Decision? (Part 2)

In most every bankruptcy consultation, I am asked, “Do you think I should file bankruptcy?”  Because it is assumed I have an economic incentive to push bankruptcy, I don’t answer the question.  Rather, I analyze the financial circumstances, and I advise what would happen to the financial circumstances if a Chapter 7 or Chapter 13 bankruptcy were filed.  I determine what, if any, non-exempt assets exist, and how much the bankruptcy will cost the prospective client.  This process is a classic cost-benefit analysis.

Having armed my consult with the facts and analysis, I ask the following question, “Can you devise a realistic plan for improving your financial circumstances in a reasonable period of time?”

This question is necessarily vague, but it is precisely the question that only the prospective client can answer.  Everyone defines “realistic” and “reasonable” differently because everyone has different circumstances and factors.    Two people with identical debt and income may answer the question oppositely because their external factors differ greatly.  A “reasonable period of time” might be 10 years for a 22 year old but only 3 years for a 55 year old.  It might be realistic for someone who is single to move back home with his parents for a year to save money, but this isn’t an option for a family of four.

Regardless of how the question is answered, it is important to recognize that bankruptcy is a tool, not a cure, and anyone considering bankruptcy must plan a life after bankruptcy.

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