When Should One Consider Bankruptcy?
This a guest post from Mark E. Godbey, attorney at Godbey & Associates, serving Northern Kentucky, Southwestern Ohio and other counties throughout Ohio. Godbey & Associates represents and advises clients in the areas of bankruptcy, divorce, personal injury, family law, probate and estate planning, small business representation, immigration matters, and criminal law.
The thought of having to go through a bankruptcy can be quite overwhelming. While filing bankruptcy can have negative repercussions, it can also be beneficial and the best option to pull you out of a bad financial situation.
If you are debating whether to file bankruptcy, here are a few tips on when bankruptcy should seriously be considered as the right thing to do.
If you have significant amounts of debt that simply cannot be paid off, filing bankruptcy should be considered as an option. Perhaps you have tried to pay off your debt, but can never seem to get ahead. Here are some questions to ask yourself:
- Are you paying on your credit cards each month, but the balance never goes down?
- Are your creditors continuing to assess interest and penalties against you?
- Are you being sued?
- Are your wages about to be garnished?
- Is your car about to be repossessed?
- Is your home being threatened with foreclosure?
- Have you or a spouse lost a job or taken a cut in pay?
If you answered “yes” to one or more of these questions, bankruptcy may be right for you. The alternative could be years of continued struggles for you and your family, without ever getting out of debt.
Debts That Can be Eliminated Through Bankruptcy
If you are considering bankruptcy, chances are you have several different types of debts. Perhaps you purchased a home and face a foreclosure. Or maybe you owe thousands of dollars in credit card debt. Some people owe significant amounts of money in tax debt. Absent any indication of fraud, debts such as credit cards, medical bills, old car loans, personal signature loans, deficiencies on mortgage loans, damages caused by an auto accident, and more can all be wiped off in bankruptcy.
Debts Unaffected by Bankruptcy
It is important to note that some debts will not be wiped out if you file for bankruptcy. Certain debts like child support, student loans, court fines, and perhaps others cannot be discharged (or eliminated) with a Chapter 7 bankruptcy. You will have to repay those debts, or consolidate your debts through a Chapter 13 reorganization plan.
If you are still considering bankruptcy, another question to ask yourself is: Once you have paid all your monthly living expenses, is there enough money left over that would satisfy payment of your debt within three years? If the answer is no, then it is time to confer with a legal professional about the potential of filing for bankruptcy.
A good bankruptcy attorney will tell you if you are eligible for bankruptcy, which Chapter (7 or 13), which debts can be eliminated, how much it costs, and many other factors. Then you can decide if bankruptcy is the right option to resolve your financial problems.