At times it can be difficult for people to even say the word “bankruptcy” let alone take a rational approach in determining whether or not it is a good option for their debt situation. If anything, families wait far too long before making the decision to pull the trigger and file their bankruptcy case.
It is understandable. There is a lot of baggage and preconceived notions that come with bankruptcy – fears of what it will mean for your future and what it means about your character.
However, there are times when bankruptcy is not only necessary but will save you much financial heart ache in the years to come.
Let’s look at four factors you should consider in determining if filing bankruptcy is a good option for dealing with your debt problems, or if it is something you should avoid all together.
- Are you facing an emergency situation?
If you are facing foreclosure on your home, or your employer has told you they have received a notice to garnish your wages, or you have been served with a lawsuit, or any other of many possible situations that will put you into emergency mode. The reason these things will put you into the position to file a bankruptcy sooner rather than later is that, when you file a bankruptcy case, you automatically get protection to prevent any of these things from moving forward. It is called an automatic stay and it will give you some room to breathe while your case is pending. All of the collection calls, letters, and other actions will stop immediately and you can figure out the next steps.
- Do you qualify to file for bankruptcy?
While there is no minimum debt requirement to file for bankruptcy, if you want to file a Chapter 7 bankruptcy, you will have to pass a means test that will look at your income and ability to pay your debt with your income as it is. There are some exceptions, but generally you will have to make less than the average family of the same size in your area. There are things you can deduct from your income, but you can check the Bankruptcy Means Test Income Limits by State to get an idea of whether you qualify.
If you don’t qualify for a Chapter 7, that doesn’t mean you can’t file for bankruptcy. It just means you will have to file under Chapter 13, which has different requirements and will last longer. If you want to keep certain assets, like your house that has some equity in it, Chapter 13 might be the best way for you to go anyway.
- Where is your money going?
Are you paying credit card payments instead of buying groceries? Or have you not been able to make those credit card payments for a while? Do you feel overwhelmed by the thought of dealing with your bills each month? If you are having a hard time making the minimum payments and don’t think you will be able to change that anytime soon, bankruptcy might be your best option to get out of the cycle and start over. You can use this Credit Card Payoff Calculator to see how long it will take you to pay off the debt paying the minimum each month.
- What is your ability to repay your debts?
While there is no requirement of any particular amount of debt to file bankruptcy, it is important to look at your income, your debt, your potential for future income, and how long it will take you to get out of debt without help. You can use the credit card calculator to determine this, or you can look at your credit card statement each month and it should tell you the same information. If you have other debts as well, check out this Debt Payoff Calculator to factor in those other debts as well.
Whatever your situation, it can be helpful to talk to a local Atlanta bankruptcy attorney who can help you work through your options to find the best one for you. You can call me at 770-975-2274 today to discuss your situation.