...by Kiley Black
Bankruptcy is an option when you owe a lot of money, but how do you know when to file? Have you been asking yourself questions such as: Am I qualified? Do I owe enough money? Does it make the most sense for my situation? Is there another option?
For individuals, there are two main types of bankruptcy, Chapter 7 and Chapter 13, and both require credit counseling. Chapter 7 is straight liquidation. This involves selling the debtor's nonexempt property to pay off the debt and it is more difficult to file. Chapter 13 is a repayment plan with a debt limit. It is best for those with a regular income with which to pay off their debts.
It is important to consult a bankruptcy expert before filing. Many believe that alimony, support, student loans, drunken driving judgments or debts from fraud are erased with bankruptcy filing, but this is not the case.
The best answer for “when should I file for bankruptcy?” is to file when you have exhausted all other options or if you simply owe too much to pay back. If you are in the situation where you owe an insurmountable amount of money which outpaces your income and you have consolidated your loans and spoken to credit agencies; or perhaps you are borrowing money from retirement plans. Also, if your wages are being garnished, bankruptcy may be what you need to address your current situation. Perhaps you have a large medical bill which continues to grow, or would take a very long time to pay off, this type of bill is dischargeable with bankruptcy. Bankruptcy can remain on your credit report for up to ten years, so this does take some thought, do not just file for bankruptcy when you owe money. If you find yourself meeting some of the above criteria, get in touch with a bankruptcy professional who can help you explore whether bankruptcy is the right option for you.