Always Behind on Bills: When is Bankruptcy the Right Choice?

When faced with insurmountable debt millions of Americans opt for bankruptcy each year. Bankruptcy should be a last resort option and only an option for debtors who lack the ability to repay due to physically disability, illness/disease, or a messy divorce. If you do decide to declare bankruptcy, it is also important to understand that only Chapter 7 results in wiping your debts clean (and that many of your assets must be sold in Chapter 7). If you make too much to qualify for Chapter 7, you will need to file for Chapter 13 and you will have to create a repayment plan and end up paying some of your debts back anyway over a 3-5 year period under the supervision of a trustee.

Bankruptcy Problems 

After bankruptcy, here are just a few of the problems you may face:

• Reestablishing Credit. Reestablishing credit the first few years after a bankruptcy filing is no easy task. Many banks are will offer a low limit credit card but with the stipulation that you keep a deposit of your limit at the bank.  
• Purchasing a Car. Most car dealerships will require bankruptcy filers to provide up to a seventy percent down payment when when making a new purchase. 
• Short-term. You bankruptcy will show up on your credit report for the next ten years and  can effect loan, housing and job applications. 
• Long-term. As a part of your permanent record, bankruptcy will be reported when applying for jobs paying in surplus of $20,000 and loans of $50,000 or more. 
• Jobs. Bankruptcy can often be view as a negative mark against your character to potential employers and can be held against your when compared to other candidates. 
• Housing. When looking for an apartment or other rental property, landlords typically view a potential tenant with a history of bankruptcy as a warning sign. 
• Taxes. You will also be held accountable to pay income tax on any debt you are relieved of as a result of bankruptcy. 

If your debt is outside of your means to repay due to injury, illness/disease, or divorce, then bankruptcy may be your only way out- but it should be considered carefully. Filing for bankruptcy is an irreversible mark against your credibility and should only be used if all other alternatives are exhausted.

Getting Help

Speaking with an experienced bankruptcy attorney can help you in determining whether filing bankruptcy is the right choice for you to deal with your unpaid bills and debts. Your lawyer can explain your eligibility for different types of bankruptcy and help you understand what may happen to your debts and assets if you make this difficult choice.