Whether to file for bankruptcy is one of the biggest decisions you’ll make in your life. An experienced bankruptcy attorney can help, but before you even seek out further advice, you could consider the following factors:
1. Have you tried to negotiate with creditors? As you know, bankruptcy is a major life decision, so it’s one you shouldn’t come to lightly. In particular, if you have tried to work with your creditors regarding payment plans, and you still can’t meet their offered terms, it may be time to consider bankruptcy. Another option to explore before filing for bankruptcy is credit counseling, which may help you set up manageable payment plans for your debts. Indeed, credit counseling before bankruptcy filing is now mandatory.
2. Do you have more liabilities than assets? How much? If you are so far in debt that you owe more in monthly payments than you make, bankruptcy might be an option. You should also consider the amount of your assets and whether it would be possible or advisable to try to liquidate any to pay off your debts; still, before selling off anything to pay debts, though, consult with an attorney.
3. Are you ready to live with the possibility of little to no credit for a while? Bankruptcy, as you probably know, does quite a number on your credit rating, so you must understand that living off of credit cards will probably not be an option for you at least soon after you file for bankruptcy. Although you can build your credit back up, you should be prepared financially and emotionally to live a life based on what you can pay for in cash.
4. How do you feel about filing for bankruptcy? Some people experience various negative emotions regarding filing for bankruptcy, including shame, failure, and depression; make sure you have a good understand of the emotional toll that filing for bankruptcy could have on you and your loved ones.
5. Can you afford bankruptcy? Although in the long run bankruptcy can be a smart financial decision, remember that filing is not free even if you don’t hire a bankruptcy attorney. That said, if you are truly ready to move forward with a bankruptcy filing, at least consulting with a bankruptcy attorney is probably in your best interests — and finding the money to pay for an attorney and to file for bankruptcy just might be in your best interests as well.
6. Are you judgment proof? Would creditors not be able to collect on the debts you owe even if you didn’t file for bankruptcy? If you’re not sure about this, be sure to contact an experienced bankruptcy attorney.
7. Will bankruptcy discharge enough debts for the process to be worth it for you? Remember not all debts can be discharged through bankruptcy, and others are rarely discharged. If the majority of your debts come from unpaid income taxes, student loans, or child support or alimony back payments, filing for bankruptcy just may not be worth it as these are rarely if ever discharged. Be sure to speak to an experienced bankruptcy attorney about your options.
8. How much property will you get to keep? State laws vary on what property is exempt in bankruptcy filings, so be sure you know which items of your property you’ll be able to keep if you file. Again, consult with an experienced bankruptcy attorney for more information.
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