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Wednesday, September 28, 2011

Is it Time to File for Bankruptcy?

I have had a number of people ask me if they can just file for bankruptcy a-nd remove all their debt worry free.  But before you consider the implications of having bankruptcy granted, it is even more important to see if Bankruptcy is even an option for you.

The Tampa Bay Bankruptcy Blog recently posted an article asking this question and can be found here:

Is Bankruptcy an Option for You?

They provide a good step by step checklist to see if you should proceed with Bankruptcy, including:


- Firstly, review if your debts exceed (or are starting to exceed) your assets.

This means actually sitting down with all your bills, financial statements, past income tax filings, and drawing a big picture.  As part of my service as a Bankruptcy Lawyer, I help put this picture together, and get a long term picture of what kind of debt you are dealing with.  But, as the article points out, the kind of debt you have is also important.  For example, as I wrote in a previous blog post, there are only very limited ways you can get student loans discharged through bankruptcy.  If you are sitting with a pile of credit card bills, however, this debt can usually be discharged.

- Secondly, if you have already tried other means of settling your debts without success, then you should think about the bankruptcy option.

A lot of times there are ways to limit your debt, such as trying to come to a settlement with a credit card company, or working with a credit counseling company (by the way, prior to filing for bankruptcy, every person is required to meet with a credit counseling company to see what options are possible - therefore it should be something you do whether or not you are dead set on filing for bankruptcy.

- Thirdly, look at what your creditors have been doing to pursue their dues.

The way creditors can try and recover debt that is owed to them covers the gambit from a simply courtesy letter that you have not paid off your balance to the other extreme of filing a lawsuit against you, and attempting to garnish your wages to pay off the debt.  The stage that creditors are at to collect what you owe them is certainly something you should take into consideration.  If it has reached the point that you have several credit company threatening to file a lawsuit to recover the debt, it may be time to move forward with bankruptcy.

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