Is Bankruptcy the Only Option When in Debt?

A lot of people think of bankruptcy as a last resort. You shouldn’t enter into a bankruptcy lightly, but you should also consider when a bankruptcy makes sense for you. Having debt doesn’t mean you will qualify for a bankruptcy. In some cases, a bankruptcy won’t help you get out of debt. Here are some things to consider about your debts and filing for bankruptcy.

What Types of Debt Are You Dealing With?

A Chapter 7 bankruptcy discharges your debts, but it won’t wipe out certain debts. Tax debts, student loans, child support and personal injury debts aren’t usually able to be discharged under bankruptcy. Chapter 7 can wipe out credit card debt, medical bills and personal loans. You may be able to keep your house and car, provided you can continue to make payments.

What Are Your Assets?

In a Chapter 7 bankruptcy, the court appoints a bankruptcy trustee to oversee your bankruptcy. This person can sell your property to give your creditors partial or whole repayment. Some of your property is exempt from this because the bankruptcy is supposed to help you get a fresh start, not make you destitute. You will get to keep a portion of your home’s equity, your personal property, your pension, certain tools of your trade and your personal vehicle. Non-exempt property would include vacation homes, second cars, heirlooms, valuable jewelry and other assets of worth. The amount that is exempt depends on where you live.

When Should You File Bankruptcy?

Bankruptcy is supposed to help you get a fresh start without your debts that are weighing you down. It is a complex legal process that does help people who have staggering medical debt, but there are some serious consequences. If you can’t figure out how to get out of your debts in five years, bankruptcy might be your only option. However, it depends on what types of debts you owe, how much you earn, and how many assets you have.

Are There Alternatives to Bankruptcy?

You may be able to renegotiate with creditors to avoid bankruptcy. Many government agencies have something called “offer in compromise.” You can make monthly payments or settle for an amount less than you owe. Loan modifications may be one option.

If you are in debt, it makes sense to speak to a Chapter 7 bankruptcy attorney such as a lawyer to seek out your best options for dealing with your payments. It could help you create a strategy moving forward to reduce your stress and get your financial goals back on track.