One of the questions you will likely have when you have a lot of debt is if you should file for bankruptcy. There are good and bad times to use bankruptcy, and it helps to know those situations so that you do it right.
You Have A Lot Of Debt
One thing that people do not realize is that it costs money to file for bankruptcy. You have to pay for filing fees, lawyer fees, and other costs associated with the bankruptcy, which may not make the hit on your credit worth it. In addition, know that a Chapter 13 bankruptcy is going to cost more than a Chapter 7 bankruptcy. It's important to weigh the cost of bankruptcy with the debt you would be discharging to decide if it's worth it.
You Have A Lot Of Assets
Sometimes it doesn't make sense to file for bankruptcy because you do not have a lot of assets. Assets are things that you can potentially lose to a creditor if they decide to take action against you. This includes a vehicle, home, or other high-value items. For example, you can use bankruptcy to stop a foreclosure and give you more time to figure out how to keep your home.
If you do not have a lot of assets then you may be considered judgment proof. This means that the creditors do not have anything that they can take from you in order to get their money back. If you do not have a job and have no assets in your name, there is nothing that can be done to get back the debt that you owe, which means you may not want to use bankruptcy just yet.
You Know What You Want Out Of Bankruptcy
It's important to also have a reason for why you want to use bankruptcy beyond getting rid of the debt. Think about how it is going to impact you 5, 10, or 15 years from now to determine if it's right to file. Are you being harassed by creditors and you want it to stop? Are you at risk of losing your home? These are all good reasons to use bankruptcy.
You Have Debts That Are Dischargeable
It's important that you recognize what debts you have that can be discharged. You may be surprised to learn that some of your debts actually cannot be discharged, such as student loans or child support payments. Only use bankruptcy if your main debts can be discharged, because you'll still be stuck with the other ones.
For more information, contact a bankruptcy attorney near you.