Bankruptcy as an Option when Behind on Bill Due to Job Loss

If you are behind on your bills because you've lost your job, is bankruptcy an option you should consider? The answer to that question depends on more than whether or not you have lost your job. Here are 5 things to consider:

1. Have you ever filed for bankruptcy before?
2. How much debt do you owe, and is it mostly secured debt (like a house or a car) or unsecured debt like credit card balances and medical bills?
3. Are your bills or debts from child support, back taxes owed or student loans?
4. Are you still unemployed, or have you found another job and are having trouble "catching up" on your bills?

5. What assets do you own (think house(s), car(s), jewelry, stocks, savings, antiques...)

Previous Bankruptcy

If you have filed for bankruptcy in the past, and have had your debts discharged, the type of bankruptcy that you filed and how long ago you filed matter. As an example, if you filed Chapter 7 you have to wait 8 years before you can do so again or you have to wait 6 years after a Chapter 7 bankruptcy to file under Chapter 13.

Debt vs. Assets

Chapter 7 bankruptcy is known as liquidation bankruptcy because your assets, with the exception of a few exemptions which vary depending on your state, are sold by the court to pay your debts. This is often a better choice for people who have high debt but not much in the way of assets.

Chapter 13 bankruptcy is sometimes called the repayment plan bankruptcy because under Chapter 13 you will repay your debts via a court supervised repayment plan. The amount you pay is dependent on how much you owe and your income. Often your debt is discharged at the end of your repayment plan even if the amount you have paid is less than you actually owed.

You can usually keep more assets under Chapter 13 bankruptcy than under Chapter 7, and protecting your house and car is possible especially if you have not been late on those payments and can continue somehow to make them.

Debts Not Discharged

If most of your debt is from alimony, child support, back taxes or student loans then you need to realize bankruptcy isn't going to to eliminate or protect you from those creditors. Bankruptcy also does not discharge you from having to pay court ordered fines that relate to criminal or misdemeanor convictions.

Get Legal Assistance

A bankruptcy will stay on your credit record for up to 10 years; it is a life-changing decision.  Talk to a bankruptcy attorney so that you can understand the laws in your state and exactly how they apply in your situation. Every bankruptcy is as different as the people who file them, and an experienced attorney can end up being your most valuable asset.