Should I file for bankruptcy?

What type of bankruptcy should I file? Do I qualify for a chapter 7 Bankruptcy? How does the process work? These are all great questions, but the first question you should really be asking yourself is should I file for bankruptcy?

Attorneys are bestowed with the title of “attorney and counselor of law.”  I take the counseling part very seriously.  I believe my job as an attorney is not just to practice law, but also to counsel people as to what is best for them.  So, there are instances where after discussing a potential client’s financial problems I come to the conclusion that a bankruptcy filing is not warranted.

However, there are those scenarios where bankruptcy is clearly the most efficient and potent manner in dealing with your problems. For instance:

  1. You wages or bank account is being garnished. Nothing will put a stop to that faster than the filing of a bankruptcy.
  2. You just got served with a Warrant in Debt or a Complaint and you have a whole bunch of debt on your credit report. At this point, it is probably just a matter of time before a judgment will be entered against you and a garnishment will likely follow shortly thereafter.
  3. You have been advised that your home is headed for foreclosure.  The fastest and cheapest way to stop a foreclosure is by filing bankruptcy.
  4. Your credit is so bad that you cannot get a car loan. Or, the car loan that you do have carries 25% interest on the loan.
  5. You have been told by personnel that your clearance may be at risk because there are just too many issues with your credit report.
  6. Your credit cards are nearly maxed out and all you have been doing for the last 18 months is paying the minimums with no end in sight.

Conversely, here are some instances where I would advise a potential client NOT to file for bankruptcy, or at least consider another option before declaring bankruptcy:

  • You simply do not have that much debt. Do not get me wrong, there is no minimum amount of debt that you must have before you can file for bankruptcy, but if you are going to employ the “nuclear option” make sure that it is worth it. Keep in mind, you typically only get a bankruptcy discharge once every 8 years.
  • You are “judgment proof.” Meaning, you are retired or disabled at this time and your only source of income is Social Security or disability income . These funds cannot be garnished or seized. In addition, you do not have any major assets like a home that a creditor could potentially seize.  If the creditor cannot take your money, cannot seize any of your assets, and your credit report is not something that you are any longer concerned about, then you may not need bankruptcy relief.
  • You only have one creditor pursuing you at this time. It is the bank that extended you the Home Equity Line of Credit on your former home that went to foreclosure/short sale 3 years ago. Once again, your credit score has recovered nicely and you are otherwise debt free.  The bank has now filed a lawsuit against you. I may be able to negotiate a more favorable result with the bank. How?  Well, for starters, my signature line on my email address says “Consumer Bankruptcy Attorney.” The banks usually figure that something is better than nothing.