Does It Make Sense To Use Bankruptcy?

Are you struggling to pay your bills and considering bankruptcy as a way to do it? If so, you're likely wondering if this legal process makes sense for you. Here are some things to consider about your debts when deciding to use bankruptcy. 

How Much Debt Do You Have?

One of the first things you should be asking yourself is how much debt you have. That is because bankruptcy is not something that you do when you have one or two bills that you're struggling to pay. It is often used in situations when people have an overwhelming amount of debt and have no way to get out of it. This is because there are a lot of costs involved with getting bankruptcy, as crazy as that may seem. You need to pay for lawyer fees, court filing fees, and things of that nature, which can really add up over time. If you only have $5,000 or $10,000 worth of debt, you may find that the fees for using bankruptcy end up being more than the debt. This money would be better spent paying creditors. 

What Kind Of Debt Do You Have?

You also need to look at the kind of debt that you have, and if that debt can even be discharged in a bankruptcy filing. For example, student loan debt cannot be discharged during bankruptcy. Unpaid taxes also need to be paid back to the government. If you owe alimony or child support, those payments must be made to your spouse and child. If the vast majority of your debts are made up of things that cannot be discharged, then it won't make sense at the moment to use bankruptcy since those debts will still remain.

Can You Use Chapter 7 or Chapter 13?

Part of filing for bankruptcy is picking the right form of it to use to get out of debt. Some people are okay with liquidating assets that they have in Chapter 7 bankruptcy because they do not own that much stuff, so it makes sense based on the amount of debt that is discharged and what they will use. However, Chapter 13 is a restructuring plan where some debts are discharged and others are consolidated with a manageable repayment plan. Fewer assets will need to be liquidated as part of Chapter 13, but you need to be making enough income to fulfill the requirements of the repayment plan. 

To learn more about filing for bankruptcy, contact a bankruptcy attorney