In tough economic times, many people find themselves with more debt than they can handle due to job loss, unexpected expenses, or other unforeseen events. Many of these families or individuals may consider bankruptcy as a solution to resolve their debt issues. While bankruptcy is a good option for many, there are some basic things to evaluate prior to filing:
Assets: Any potential debtor needs to know what they own, how much those things are worth, and most important, which items are protected (exempt) if they are considering a Chapter 7 liquidation case. Many prospective filers make the mistake of assuming that their case will be similar to their friend’s case, or someone else they know who filed previously. That is not always correct. Every debtor needs an analysis specific to his or her situation.
Debts: Anyone considering bankruptcy needs to know which debts are eliminated (dischargeable), which are not, and which debts creditors may challenge as non-dischargeable. A debtor who files without first determining which debts are likely to be removed may not get the intended benefit of the bankruptcy. A common misperception is that the bankruptcy law changes that went into effect in October 2005 made it so that debts can no longer be discharged in Chapter 7, and still need to be repaid. That is not true. Most of the debts that were dischargeable prior to the law change are still dischargeable.
Qualifications: Whether an individual or couple qualifies for bankruptcy and which chapter applies to their situation is based primarily on income and the amount of debt. There are instances where the bankruptcy that the individual or couple qualifies for does not provide the type of relief intended. For example, a debtor trying to save a home from foreclosure by proposing a plan to repay the missed payments over a long period of time, could benefit from a Chapter 13 case, but may not have the income required to qualify for a Chapter 13. A Chapter 7 filing might be available to that debtor, but would not help significantly with the mortgage issue.
It is often advisable to consult with a professional familiar with bankruptcy law and other debt-related issues to properly assess which of the available options is best for handling the existing situation. A bankruptcy filing may help, but a full analysis is needed prior to filing to make the right decision.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com .