• 19
  • August
    2010

Filing for bankruptcy is not a decision that one should come to lightly. There are many important issues to consider because bankruptcy is a big decision that will affect you for a number of years. However, don't get the impression that bankruptcy only has negative repercussions. Filing for bankruptcy may be a positive step toward getting your life back on track after unforeseen circumstances such as job loss, medical problems, divorce, or some other event created financial problems for you.

One reason making a decision to file for bankruptcy may be so difficult for some is because bankruptcy itself sounds scary and is not fully understood. This can be a complicated decision and it shouldn't be one that you make on your own, if you find yourself in a financial situation in which it seems there is no way out, going over your options with a bankruptcy attorney may be a good first step.

Here is some basic information that you may want to consider to help you determine if you want to explore the option of bankruptcy. Remember, bankruptcy can be a complex issue, so never be afraid to ask questions or seek advice.

Who is allowed to file for bankruptcy? For individuals and families, there are generally two types of bankruptcy filings, Chapter 7 and Chapter 13. If you simply don't have enough money to pay all of your bills, Chapter 7 might be for you.

To qualify for a Chapter 7 filing you will have to pass what is called a "means test," which takes into consideration how much you make, how much you owe, and the median income in your state. However, even if you can't pass the means test, you still have the option of a Chapter 13 bankruptcy, which works differently, but still may provide you with the financial relief you need.

Are your financial problems temporary or long-term? Throughout our lives, we often run into problems from time to time. When times are rough, it may seem like they will never get better, but sometimes they do. Before you file for bankruptcy, you should ask yourself if this is just a rough patch, or if this is a long-term problem.

While you don't want to deplete your assets or exhaust your retirement savings to pay bills, you also don't want to file for bankruptcy if it isn't necessary. If you are about to come into money through a better paying job, an inheritance, or some other way, you may want to hold off on bankruptcy and save that option for another day.

In our next post, we will address some more questions you may want to consider before making your bankruptcy filing.

Related Resources: Is bankruptcy right for you?