Should I File Bankruptcy

Thousands of Americans file for bankruptcy, Chapter 7 or Chapter 13, each year but not everyone knows what signs to look for when deciding on whether or not filing will help them financially. Filing for bankruptcy, either Chapter 7 or Chapter 13, can either help or hurt a person or individual’s financial standing. There are positives and negatives to filing for bankruptcy. Always keep in mind that a bankruptcy attorney will be able to determine whether or not a party should file for bankruptcy given their financial situation. Also, most states charge a party filing for bankruptcy a filing fee. The fee varies from state to state but for the most part the fee costs roughly $1,700 per filing.

Reason to File for Bankruptcy

There are three main reasons as to why a person or a corporation should consider to file for bankruptcy. The first reason is that the debtor has already tried to negotiate with their creditors. Many debtors will try to negotiate a different rate of payment to their creditors to fulfill a debt or will try to restructure a payment plan but the creditors decide that they do not want a new payment plan or do not want to be paid a portion of what they are owed. Instead, they want the entire amount of the debt to be paid and they are not going to budge. Because the creditor does not want to be paid over time but instead wants to be paid immediately and the debtor does not have the financial means to do so, the debtor has no other choice than to file for bankruptcy. The second reason to file for bankruptcy is when the debtors’ liabilities exceed their assets. Whenever an individual is paying more each month for their debt than they are making then filing for bankruptcy is the only solution to the problem. The third reason for filing for bankruptcy is when the person wants to keep their IRA. In 2005 the Supreme Court ruled that creditors cannot liquidate a person’s retirement accounts to satisfy a debt. This means that people filing for bankruptcy will not lose their IRA.

Consequences of Filing for Bankruptcy

As with anything people do in their lives there are positives and of course there are negatives. The consequences associated with filing for bankruptcy are three-fold. The first negative to filing is that some people are affected mentally. Some people that file for bankruptcy become depressed and begin to tell themselves that they have failed in their efforts to become successful. The second negative is that people that file for bankruptcy will not be able to borrow during the process. Even after the process is complete it may take years until the person that filed is able to obtain a line of credit again. The third negative to filing for bankruptcy is that that person’s credit will no longer be considered ‘good.’ The Fair Credit Reporting Act says that credit agencies are legally allowed to report a bankruptcy for up to 10 years on a person’s credit report. This will ultimately affect a person’s ability to acquire a loan or a mortgage on a house or vehicle. So, before anyone files for bankruptcy they should weight the positives and negatives with a bankruptcy attorney.

 

If you need more information, consult with a Bankruptcy Lawyer, they will be able to walk you through the entire process and answer all your questions.

 

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