Is Bankruptcy the Right Choice for You?
Many people begin thinking about bankruptcy as an option only after they have accounts go into collection and it becomes blindingly apparent that they cannot service their debt load while paying other bills. When faced with the choice of paying off a credit card or going without food, most consumers realize that there is a serious problem.
However, bankruptcy is not for everyone. There are other ways you can manage debt, and one of them might work better for you. Below we run through some of the considerations we raise with our clients.
Understand the Alternatives to Bankruptcy
Instead of filing for bankruptcy, you could try to manage your debt in other ways:
- You could ask a creditor to grant a deferral for a few months, if you think you can get back on your feet in that amount of time.
- You can work with a credit counselor to come up with a budget. A counselor can also request that creditors waive late fees and penalties and possibly also reduce your interest rate, making it easier to pay down your debt pile.
- You could negotiate with a creditor to accept a lump sum in exchange for wiping out the remainder of the debt. For example, a creditor might accept 50% of the face value of the debt in exchange for cancelling the remainder.
Determine Whether Bankruptcy Will Help
Bankruptcy cannot eliminate all types of debt, so it might not be appropriate in all situations. For example, bankruptcy won’t help with secured debts, such as your home mortgage, because the security interest survives bankruptcy. If you have a secured loan, you will probably lose the collateral.
Also, bankruptcy cannot get rid of child support and alimony payments, which can lead to wage garnishment. If these make up most of your debt, then a bankruptcy will be of less help to you.
Analyze Whether this is the Right Time to File
Once you file bankruptcy, it is hard to go back. You should carefully consider whether now is the right time.
For example, you might be applying to a new job in a month and you are sure the employer will run a credit check. If your credit is already shredded—multiple collection accounts, defaults, etc.—then filing for bankruptcy might not really hurt you. However, you might have soldiered on and been servicing your debt with timely payments, in which case you could have a high credit score. In this situation, you might want to delay filing.
Another reason to delay is when you have amassed considerable medical debt but have not yet reached maximum improvement. For example, you still might need another surgery or medical procedure that could prove costly. In this situation, you might want to delay filing so that you can include these future medical bills in your bankruptcy petition.
Talk with a bankruptcy attorney about timing. You might agree that you should file but could delay it for a few months or more.
Contact a South Florida Bankruptcy Attorney for More Information
Bankruptcy has granted millions of indebted consumers a fresh financial start. If you are considering whether to file, please contact a Plantation bankruptcy lawyer. You can schedule a free consultation with an attorney at Nowack & Olson by calling 888-813-4737.