If you are wondering if you should file for bankruptcy, there is a good chance that it might be a good option. Most people wouldn’t ask themselves this question if there wasn’t something that was out of balance with their finances. Sometimes there has been a slow steady increase in bills and the situation seems out of control. Sometimes an old debt pops up to cause trouble, either in collection or through a lawsuit. Sometimes it is an unexpected event like an illness or a loss of a longtime job.
There are a few common problems that lead to people asking this question.
You had a loss of income, or an emergency, that caused you to get behind on your payments.
A divorce or job loss has cut household income.
Medical bills are too high to pay.
Credit cards or loans have grown to a point that one credit card/loan must be used to pay the others. Each month’s paycheck or social security goes to make payments, and it is necessary to use credit to buy groceries, gas or other necessities.
Mortgage loan payments have increased and there is no longer any money left to pay other bills.
Chapter 7 may discharge medical bills, credit cards and loans to allow someone to live on a lower salary. If income is back up and steady, Chapter 13 might help overcome temporary setbacks and give someone the time needed to catch up on payments. Chapter 13 might lower payments enough to be able to balance a budget, or Chapter 7 might be needed to wipe out unsecured debts and get the household back on track.
Each situation is different and each situation should be analyzed carefully when making a decision as important as whether you should file for bankruptcy or not. An experienced lawyer can make the right recommendation to help a person decide on the right avenue for their particular situation, including not filing a bankruptcy case if there is a better alternative.
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Bankruptcy v. Credit Counseling By Carmen Dellutri, Attorney at Law on Sep 17, 2007
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Why People File for Bankruptcy (Part 1) By Brett Weiss, Attorney at Law on Aug 17, 2007
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Last modified: February 14, 2013