Debt And What You Can Do About It

Key Questions to Consider When Evaluating Your Financial Situation

Bankruptcy may seem daunting, but it’s often a powerful tool for those struggling with debt. When evaluating your situation, the following questions are essential:

1. What Assets Do You Own? Under bankruptcy law, you’re entitled to keep certain property, referred to as ‘exempt property’. Ensuring all your assets fit within these exemptions is crucial. If not, Chapter 13 bankruptcy, rather than Chapter 7, may be a better option as it prevents the loss of non-exempt property.
2. What Are Your Secured Debts? Secured debts are those where creditors hold collateral. Understanding your status regarding these debts, such as if you’re behind on payments, is crucial. If you’re substantially behind but need to keep the assets, Chapter 13 might be the way forward, as it allows reorganization of payments, thus avoiding repossession and foreclosure.
3. Do You Have Priority Debts? These include taxes, child support, etc., which cannot be wiped out in bankruptcy. If you’re struggling with priority debts, Chapter 13 may be the best option as it allows you to pay these through the bankruptcy process, avoiding potential legal complications.
4. What Is Your Income Level? For a consumer case (where more than half of your debts are consumer-related rather than business-related), your income must fall below a certain level to qualify for Chapter 7 bankruptcy. This amount varies depending on your location, family size, and other factors.
5. Have You Filed for Bankruptcy Before? If you’ve filed for bankruptcy less than eight years ago, you may not be eligible for Chapter 7 and may need to file Chapter 13 instead.

How Severe Should Your Debt Be To Consider Bankruptcy?

It’s not about a specific dollar amount, but rather about whether you can manage your debt and live comfortably without accumulating more debt. If you’re constantly getting into more debt just to survive, then bankruptcy may be a viable solution.

Bankruptcy can seem like an intimidating step, but in many cases, it can prevent a cycle of increasing debt. What is often seen is people accruing more debt to survive, sometimes even securing debt against assets that could otherwise be exempt. In such instances, filing for bankruptcy earlier might have been a wiser choice, preventing additional debt on exempt assets and improving the individual’s financial situation.

In essence, any time you can’t pay your debt and continue to live without sinking into more debt, bankruptcy should be strongly considered.

For more information on Debt And What Can I Do About It, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (501) 984-7567 today.