If you're battling debt, you know how frustrating it can be. Collectors call you day and night, paying your bills feels like a game of chess, and stress is a part of daily life. When facing this situation, it's no surprise that so many people wonder if filing for bankruptcy is the right decision. After all, having your debt wiped out sounds like a great way to get back on your feet, right? However, many debtors are shocked to find out that it might be better to do nothing at all in some cases -- at least for now. Here are some questions to ask yourself when trying to determine whether you should file or wait.
Creditors talk a big game, and when they call you, it might seem like they have legitimate threats. However, in some situations, the only thing a creditor can do is annoy you with phone calls and letters. If you don't have any real estate equity, you don't have any non-exempt assets, you have a low-paying job or are unemployed, and you have income that creditors can't take, such as public entitlement benefits, then creditors can't touch you. This situation is called being "judgment proof," and as long as you can put up with the phone calls and letters, it might serve you well to hold off on filing for bankruptcy.
Depending on the type of debt you're facing, bankruptcy might not do you any good. If you have mounting credit card debt or medical bills, then bankruptcy probably can help you. However, if you're staring down past-due child support payments or you owe money to the IRS, filing for bankruptcy isn't going to do you much good because you'll still owe those debts afterward. Student loans can also be tricky to wipe out, because sometimes the lender will impose wage garnishment, removal of your eligibility for aid, revocation of your right to defer, and even a reduction in Social Security and disability income.
If you're behind on your mortgage payments or haven't been able to make your car loan payments, you might benefit from filing for Chapter 13 bankruptcy. Chapter 13 bankruptcy can help you by restructuring your debt and allowing you to pay it off over the course of three to five years with one monthly payment. If you have arrearages on your loans, you can't make those up through a restructuring plan. However, if you have a lot of additional debt, other than your loan payments, they can be wiped out through Chapter 7 bankruptcy. Filing for Chapter 7 might free up the income you need to catch up on your payments.
Bankruptcy doesn't have to be a scary process. In fact, you can use bankruptcy to your advantage to help get you back on your feet. However, bankruptcy is a legal process, and as with all legal decisions, it's best to consult with a bankruptcy attorney before making any decisions. Only a qualified bankruptcy lawyer will be able to look at your individual circumstances and advise you as to whether or not filing a bankruptcy petition will benefit you.
Professionalism is the key consideration in selecting a bankruptcy lawyer. Assess his or her professionality before a word is even spoken in a consultation. Is the office reception area clean and in order? Does the receptionist seem to be friendly and efficient? Make the same assessment inside of the lawyer's office. Does the lawyer appear dedicated to his or her profession?
Alternatives to bankruptcy should be discussed and your questions must be answered concisely. Any retainer agreement should be in writing.
Spousal maintenance (alimony) and child support cannot be discharged in bankruptcy. Any unpaid tax liens must be resolved. Some state and federal taxes might be discharged if they're old enough. Any judgment taken against you for an intentional tort cannot be discharged, and other debts incurred shortly before filing for bankruptcy will also not be considered.
Maxing out your credit cards before filing for bankruptcy is probably the last thing you'd want to do. You would be obtaining goods and services with no intention whatsoever of actually paying for them. There are criminal laws against that. Would you rather be broke or broke and in prison?
As published in
DELAWARE TODAY 2021
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