When paying your bills on time becomes a struggle, you may want to deal with the debt load once and for all. A chapter 7 bankruptcy filing can provide almost instantaneous relief from your budget struggles but carries with it some negative effects. In some cases, bankruptcy provides debtors in over their heads with an opportunity to make a fresh start with their financial situation, but for some, the potential for future credit issues is not worth it. Read to learn more about how deep in debt you should be before yourfile for a chapter 7 bankruptcy.
How Your Debt Load Affects You
No matter how much money to owe to your creditors, the decision to file for bankruptcy must be based on factors other than the dollar amount of your debts. The bankruptcy courts do not require that a filer have a minimum level of debt to file for a chapter 7. What is important is how your financial situation affects your life. What might be a small amount of debt to one person can seem overwhelming to others. Most people don't end up filing for bankruptcy because their debt has risen to $50,000 or $100,000 or more, but because of the stressful way you begin to feel about your job, your home, your family, and more. When debt collectors make you dread answering the phone or you lack the money to pay for the necessities of life, those issues can cause you to seek debt relief through bankruptcy.
Questions to Ask Before You File
If you feel a building frustration with your inability to pay your bills, you might want to consider the answers to the following questions before you file.
1. Of the debts you owe, how much are secured debts and how much is unsecured? Secured debts are attached to property, such as a mortgage to a house. Unsecured debts are not attached to property, like credit cards. While bankruptcy will probably wipe out all of your credit card debt, some secured debts carry the risk of loss of property.
2. Of the debts you owe, how many cannot be included in the bankruptcy? Taxes, child support, student loans, and more cannot usually be included in a bankruptcy filing. Speak to an attorney to learn more before you proceed.
3. If you were to attempt to pay off your debts without filing for bankruptcy, how long would it take?
4. Are you being sued for a debt, have debts in collection, have your wages garnished, etc?
Speak with a bankruptcy attorney if you are undecided about a filing for bankruptcy.