Let me tell you about a common scenario I encounter. It’s towards the
end of a bankruptcy consultation and I’ve given my speech regarding the
ins and outs of the bankruptcy process, the difference between chapter 7
and chapter 13
filings, and what not. I ask my potential client if they’ve any further
questions, to which they reply “well, do you think I should file
bankruptcy?”
Let me say upfront that I simply can’t answer this question. I’ll do
my best to supply you’ll all of the bankruptcy knowledge you need, but
in the end this is a decision you must make on your own. Do not get me
wrong, if you let me I’ll talk until blue in the face, weighing your
options and advising you to the best of my ability. But in the end, it’s
ultimately your call.
With that said, I’ve compiled some general points to think about when you’re trying to decide whether or not you should file for bankruptcy protection.
One more interesting thing close to this subject. Have you already
tried to negotiate? Often times, creditors are willing to work with you
by compromising on payment plans or perhaps lowering interest rates. You
say you tried once, and were denied? Call again and speak with someone
new. I’ve found that, when negotiating with creditors, it’s often takes
persistence to accomplish much of anything. However more often than not
creditors are willing to work with you, especially when the account is
in arrears. At the end of the day, they just want to get paid something.
How do your liabilities compare to your assets? It’s especially important when filing chapter 7 bankruptcy that you get an idea of the value of your non-exempt assets as well as your total liabilities. Remember that under chapter 7 bankruptcy
protection, a trustee will liquidate your non-exempt assets to in
partial fulfillment to your creditors. Commonly, bankruptcy will make
the most sense when your debts outweigh the value of these assets.
What is the nature of your debts? Remember that filing bankruptcy
is not a cure all, and that certain categories of debts aren’t
discharged. The most common non-dischargeable debts I see are student
loans, alimony and child support. There are others, so be sure to
address this point with your bankruptcy attorney.
What is the nature of your assets? When filing chapter 7 bankruptcy,
your assets will be categorized as either exempt, and unavailable to the
trustee, or non-exempt, and included as part of the bankruptcy estate.
How do these 2 categories compare in your specific case.
Will you lose your house or car? Remember that you’re only permitted a
maximum amount of exempt equity in various assets including your house
and car. If your present equity exceeds this number, your asset may be
sold to partially repay your creditors.
Are your wages currently being garnished? Bankruptcy might be
indicated if certain creditors have already received judgments against
you and, as a result, your wages are now being garnished. Often times,
filing bankruptcy can suspend wage garnishment and provide immediate
relief in such cases.
Have you been sued? Even if you do not currently have a judgment
against you, bankruptcy may be suggested in situations where it can
prevent a future judgment (see above wage garnishment).
How is your savings distributed? Money present in savings/checking
account is available to the trustee, in order to prevent its entry into
the bankruptcy estate you must spend it down below the allowable
exemption amount. Even so, money distributed among IRAs and 401(k)s is
often protected.
Do you have co-signers on any of your debts? While filing bankruptcy
will remove your liability upon debt discharge, you co-signers may
remain liable. This may influence your decision to file, as your friends
or family members would then be burdened with your debt.
How will you be affected by a negative credit score? Filing
bankruptcy can negatively influence your credit score. But nevertheless,
the decrease in number is often less than expected. This is especially
true if you already have one or more accounts in arrears, which have
been reported to the credit bureaus. Of course, in today’s hostile
lending environment you can expect upwards of a several year period in
which you have difficulty securing loans.
Do you have extra money every month? I always tell my clients that,
if they have not already, they should create a monthly budget. Include
all necessary expenses, but omit your debts and superfluous expenses.
How much is left every month? Is it enough to pay off your debts at the
current interest rates? What about at lower interest rates?
How old are you? How long do you have to rebuild your savings prior
to retirement? It’s no hard and fast rule by any means, but age can
sometimes correlate with the need to file bankruptcy.
How many dependents do you have? I often kind that clients with no
dependents can reduce their monthly expenses and pay dot their debts
more easily than those with dependents. But nevertheless, the median
income level for chapter 7 bankruptcy is based on household size and
thus could determine your eligibility for bankruptcy.
Again, theses aren’t rules set in stone. Instead, they’re simply
points to consider. As always, I recommend you speak with a licensed
bankruptcy attorney and thoroughly discuss all options prior to making a
decision. If you have any questions, feel free to give me a call or
visit my website and take advantage of our live online chat feature.
My name is Christopher H. Ariano and I’m a Phoenix bankruptcy attorney
and managing partner of Ariano & Reppucci, PLLC. We’re a boutique
law firm located in Phoenix, Arizona that focuses on the preparation and
filing of consumer bankruptcy petitions. If you’re in need of an
experienced and dependable Phoenix bankruptcy lawyer, do not hesitate to
contact me today.
The information contained on this web site may provide general legal
information but is not intended to give legal advice or counsel on any
specific legal matter. It doesn’t create an attorney-client relationship
and shouldn’t be relied upon in lieu of legal counsel. The links
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Website as well as other factors in making your own decision.
http://ch-bankruptcy.com/should-i-file-bankruptcy/
Ankit Rawal
