When Should I Consider Bankruptcy As A Viable Option?

Wednesday, January 7, 2015, 6:00 AM | Leave Comment

Where the mere mention of the word bankruptcy was once enough to cause anyone to cringe in dismay, today the word carries a more acceptable connotation–without any stigma attached to it.

Thanks in part to Chapter 7 and Chapter 13 provisions under the law, bankruptcy may be the way to go for countless of debt-burden individuals.

When Should I Consider Bankruptcy As A Viable Option

  • Let’s have a look first at Chapter 7 and when it makes sense to file under its protection.

    Each form of bankruptcy filed depends on the particular set of circumstances a person may have.

    No situation has a cookie cutter resolution for creditors or debtors.

    Are you protected against seizure of property or income–even without a Chapter 7?

    Will enough debts be discharged to make it a good option for you?

    Is there any property you really want to keep?

    These are some of the questions you may ask yourself in determining if a bankruptcy is right for you.

    Some people simply do not have enough property or disposable income to merit a Chapter 7 judgment against them.

    Furthermore, many Social Security recipients know their monthly income can’t be touched by creditors.

    Moreover, if all of your property is exempt, then its doubtful creditors will want to pursue a judgment against you.

  • Some Common Property Exemptions

    • Cars up to a designated amount of value

    • Necessary clothing

    • Needed household furnishings, goods and household appliances

    • Jewelry and personal belongs–up to a certain value

    • Life insurance policies and pensions up to a certain amount

    • Part of your house’s built up equity

    • Tools of your trade or profession

    • A part of earned but unpaid wages

    • Welfare, social security and unemployment compensation

    • Some Typical Non-Exempt Items

    • Musical instruments of a certain value

    • Stamp, coin, antique and other collectables

    • Family heirlooms

    • Cash, stocks, bonds and other forms of investments

    • A second car, truck and/or vacation home

  • When to File Under Chapter 13

    In essence, filing under a Chapter 13 enables debtors to repay the debts over a designated period.

    Chapter 13 is typically best when your car loan or mortgage payment is past due and you want to make up the payments.

    It is also commonly used when certain debts, such as student loans/tax obligations, cannot be discharged through a Chapter 7 but can be paid off under a Chapter 13.

    With a Chapter 13 and an earnest intent to repay your debts, you simply repay the obligations out of your income over a court-determined period.

    Especially in the case of a non-exempt property that you wish to maintain in your possession, Chapter 13 might be the better choice for you–if the court so approves it.

Whether you file under Chapter 7 or Chapter 13, bankruptcy may be the best option you may have at your disposal.

It offers a new fresh start and can even speed up re-establishing credit in many instances.

Information Credit: Exelby & Partners Ltd

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