When you are considering filing for bankruptcy, many things may run through your mind. Is filing for bankruptcy really the best option for me? How does bankruptcy work? What type of bankruptcy should I file? Am I even eligible to file for bankruptcy? These are all valid questions that you should ask yourself before you begin the bankruptcy process.
Filing for bankruptcy should be a last resort and should never be a decision that is hastily made. Many people file without being properly informed on the process and the consequences. While considering bankruptcy, you should examine these six factors as well as consult with a bankruptcy attorney to weigh your options.
What To Consider Before Filing for Bankruptcy
- Other Options. Many times there are alternatives that can be more effective and beneficial as a financial remedy that you may have not thought of yet. Take a look at the types of debts that you have and evaluate all of your options. Often times, creditors are willing to work with debtors to settle debts in an amicable manner. If this is an option for you, perhaps that would be better than filing for bankruptcy.
- Losing your property.The most common form of bankruptcy is Chapter 7. During Chapter 7 bankruptcy, a trustee is appointed by the court to handle your bankruptcy paperwork and oversee the sale of your property. The proceeds from the sale of your property is used to pay off your creditors. You have to be sure that you are financially and emotionally willing to part ways with your property.
- Lawsuits. If a creditor has a lawsuit against your or has already obtained a judgment, bankruptcy can help. When you file your bankruptcy petition, an automatic stay goes into place immediately. This prevents creditors from engaging in collection activities during the bankruptcy process.
- Impact on Credit History. Bankruptcy has a tremendous effect on your credit score. If your credit is already poor, you won’t see too much of a change, but if your credit was in good standing, filing for bankruptcy can cause a dramatic decrease in your score. Moreover, the bankruptcy can stay on your credit report for seven to ten years. Make sure you are willing to deal with this before filing.
- Eligibility. You cannot file for bankruptcy simply because you want to. You have to be eligible to file for bankruptcy by meeting the requirements of the means test, which measures your disposable income. For Chapter 7 bankruptcy, your disposable income must be lower than the average disposable income in your given area. For Chapter 13 bankruptcy, your debts must not exceed a certain dollar amount and you much have enough disposable income to pay your debts via a payment plan over the next three to five years.
- Type of bankruptcy. You need to decide which bankruptcy filing is in your best interest. Both Chapter 7 and Chapter 13 bankruptcy have their advantages and disadvantages. Take a look at the types of debts you currently have, your monthly income and expenses, the type of property you own and what you hope to gain from filing for bankruptcy.
Whether or not you file for bankruptcy, you need to sit down with an experienced bankruptcy attorney to talk about your options when you are in financial straits. Bankruptcy is a complicated process that has multiple implications on the financial future of you and your family. Here at Morgan & Morgan, we have more than 30 years of experience helping people with bankruptcy and debt relief. Visit our website today or call (706) 548-7070 for a free consultation.