Filing for Bankruptcy – Points To Consider

Bankruptcy is a method that can help individuals or businesses pay back or eliminate their obligations under the guidance and protection of a bankruptcy court. Bankruptcies are usually Chapter 7 or Chapter 13 processes. With a Chapter 7 bankruptcy, the court wipes out the liabilities you owe. With a Chapter 13 bankruptcy a plan is drawn up with the bankruptcy court, explaining how you’ll repay your creditors. Some debt will have to be paid in full; while some of the others are not paid at all or simply part of the debt is paid.

There are, however, some debts that cannot be taken care of in a bankruptcy process such as alimony, child support or tax obligations. Because bankruptcy is an individual and often highly emotional call, it is up to the individual to file for bankruptcy. Before making that decision, there are specific facts you need to think about.

When considering bankruptcy, if you have enough money to pay those you owe, you may not qualify for Chapter 7 bankruptcy. Another point to consider is if it seems like your financial footing may be better in the near future, you may want to wait it out before filing for bankruptcy.

If you are thinking that bankruptcy will take care of tax debt or child support needs, think it over again. Bankruptcy won’t take care of these wants. Also, student loans will only be discharged in bankruptcy in some limited cases of extreme hardship, and these results will vary from court to court.

Another point to think about is the counseling that you’ll need before filing for bankruptcy. During this counseling and academic sessions, you’ll find out what it’s like when you file for bankruptcy. In some cases, your property could need to be handed over and you credit history will drop which will make it harder in the future , should you want or need a loan.

In addition, another point to think about is rather than filing for Chapter 7 bankruptcy, Chapter 13 may be a better option. With this plan, you pay off your dues and you get to keep all your property. Credit counseling can also be a big help.

It’s also significant to remember how you may feel after you sign up for bankruptcy. there were many that regretted bankruptcy because they felt humiliated and down. Some felt better paying down their bills and knowing they made an attempt to revive their good standing.

Take into account that bankruptcy can be positive in that many come away from bankruptcy with a more comprehensive understanding of the way to handle their money and that may stop future mistakes that could impel them into debt.

So, before filing for bankruptcy, check out counseling and educational sessions. By going thru this process first, you may understand better if filing for bankruptcy is for you. The method of counseling and academic sessions can also show you ways and methods on how to better handle your financial affairs and to prepare you to live a better financial life.

Often times, it requires a financial disaster for someone to see where they are going wrong and the way to make their lives better.

17 Replies to “Filing for Bankruptcy – Points To Consider”

  1. This article was a great overview. However, in the case of child support (which isn’t taken care of by chapter 7), what would one do to keep up with payments after forfeiting all assets? I appreciate that this article recommends financial counselling and highlights the emotional toll that filing for bankrupcty may have on a person.

    1. Child support is a parental duty; a “priority debt”, and is nonchargeable in bankruptcy. But being that one would be wiping out most of their other debt in a bankruptcy proceeding, this frees up pressure and finances to take care of parental duties. Payment plans and adjustments could also be worked out in order for a parent to satisfy their child support obligations.

  2. Great article! Credit counseling is probably going to be my next step. It’s hard for millennial grads to escape mountains of student loan debt. Thanks to this information; I’ve learned that neither method of filing for bankruptcy is going to be a viable solution. And, at the same time, it’s not worth getting into an irreversible financial disaster before seeking credit counseling.

  3. After reading this article, I think I will advice my friend not to file for Bankruptcy yet. Knowing that it will not take care of child support and it will take off points from your credit standing, it’s way better to undergo some counseling first to see if there are other options as well. Thank you DebtGuru!

    1. Hi Lina, yes it’s always better to explore all other options before pulling the lever to file for bankruptcy. It’s not for everyone, but for some people it is the best solution to get the monkey off their back!

  4. Thanks for sharing this article that provides relevant and useful information on the process of filing for bankruptcy and the required counseling when filing. I wasn’t aware that one would be responsible for tax obligations after filing. I wonder, are businesses subject to the same obligations as individuals as far as tax debts still being owed after filing for bankruptcy?

    1. Hi Julie, business debt/bankruptcy is a whole ‘nother story. That’s chapter 11, and perhaps we’ll address it here soon, but this site is primarily geared towards consumer debt issues. But I can tell you this: Business tend to get way with a whole like more than consumers ever will.

  5. I am amazed with the fact that there is actually such thing called filling bankruptcy where individual or company can find a way to eliminate obligation. I think this is a ‘privileged’ which only exist in first world countries. In my country, there is no such thing, once you go bankrupt, you have to pay no matter what, they will find your next of kin, family member to pay your debt etc.

  6. Thank you for this article, I feel like I finally understand something about the way that bankruptcy works! I will admit that I have been thinking about whether or not filing for bankruptcy would be a good idea for me. My mom filed for bankruptcy when I was a kid, and by now she has fully recovered and has great credit. However, after reading this article, that’s not a consideration anymore. The vast majority of my debt is student loans. I guess I will have to search for another way to manage my debt; perhaps a credit councilor is the way to go?

    1. Hi Ava, I have updated the statement about student loans. You can try to get them discharged, and while it may be only done in very limited situations, you can consult with a bankruptcy attorney and they may still be able to include them.

  7. Thank you for writing this elaborate explanation on bankruptcy. I never knew that you could be able to not pay your debt once you filed bankruptcy. No wonder I have seen several people/companies who filed for bankruptcy and seemed to be doing fine a few months afterward.

  8. Why do we get ourselves into a position where we need to file for bankruptcy. Major reason is because of the debts we owe, which debt is really something money the banks prints based on nothing. Bankruptcy for me is just another way these corporate pigs have more hold on us. That’s just my opinion

  9. This Article really useful. One should know the rules and regulations when filling for Bankruptcy to avoid facing problems in the future and for fast processing.
    Thanks DebtGuru.

  10. It seems to me that filing for bankruptcy is more popular among the rich and famous. Plus they bounce back from it rather well. Toni Braxton filed for bankruptcy twice and she is doing well. I once considered it but I didn’t qualify.

Leave a Reply

Your email address will not be published. Required fields are marked *