By Ryan C. Wood
This is a common question, “Should I file bankruptcy?” Well, that depends upon many factors and only the person who is actually filing for bankruptcy protection can answer that. Bankruptcy is designed to provide an individual or business filing for bankruptcy relief from their creditors and discharge their eligible debts. After the discharge is entered by the court the individual or business can continue without the burdens of the discharged debts and lead a healthy productive life. Bankruptcy is designed to provide a fresh start.
So how is the question whether to actually file bankruptcy answered? Each individual or business needs to weigh the positives and negatives of filing bankruptcy and then make the best financial decision. There are no easy answers when debts become so much of a burden that bankruptcy help is sought.
During one of our free consultations we will discuss your income, expenses and assets to determine what is possible. Do you qualify to file a chapter 7 bankruptcy and receive a complete discharge of your eligible debts, or is a chapter 13 necessary to reorganize your debts. Not everyone will qualify to have all of their eligible unsecured debts discharged in a chapter 7 bankruptcy. Filing a chapter 13 case is not the end of the world though. Filing a chapter 13 reorganization could result in the discharge of most or all of eligible unsecured debts, depending upon the circumstances, just like in a chapter 7. Chapter 13 requires that the filer pay back what they can afford to pay back, usually over three to five years. The monthly chapter 13 plan of reorganization payment could be very little, or quite a bit depending upon your income, expenses and assets.
In 2005 the Bankruptcy Code was modified to include a test to determine whether a filer has any disposable income to pay their unsecured debts with after normal living expenses. This is probably the largest area of confusion. Just because a bankruptcy filer spends $1,000 a month on food does not mean that expense will be allowed. If you have family of 6 or more people though, spending $1,000 a month may be very reasonable though. It all depends upon the circumstances. Or an expense for yoga lessons costing $1,000 a month. Is that reasonable in light of having a mountain of credit card debt? Yoga lessons will most likely be deemed not reasonable and need to be stopped so that the person can afford to pay something to their creditors.
The bottom line is that filing bankruptcy is a personal decision that must be made by the person or business filing for bankruptcy protection. How a person or business fits into the bankruptcy box depends upon income, expenses and assets, and there are all different. That is why it is important to seek the counsel of an experienced bankruptcy attorney.