Should I File for Bankruptcy?

Should I File for Bankruptcy?

Probably.  Filing for bankruptcy is an option people do not want to consider until it is too late.  Once you get past the stigma of bankruptcy, it is a really good program.  The earlier you consider whether bankruptcy could help you, the better off you will be.

What is bankruptcy?

Bankruptcy is a federal program to help with debt.  The ability to deal with debt in bankruptcy has been around since the country was founded.  The rules have changed over the years, but the concept remains the same.  Anyone can have trouble with debt.  Debt problems should not define who you are or keep you from living your life.  So, there is a fresh start called bankruptcy.  It is just one way the government takes care of you.  There is no reason to resist using it.  When you get old enough to retire, are you going to refuse to use social security?  Why would you refuse to use bankruptcy?  They are both government programs for the benefit of the people.

Bankruptcy is how the federal government wants you to deal with overwhelming debt.  Bankruptcy is so important to the federal government that it does not leave it to the state courts.  The United States Bankruptcy Court still handles bankruptcies in every state.  Of course, the government has an interest.  It does not want you to get sick of working just to pay your creditors.  If you do, you might stop working and stop paying taxes.  To keep you on the tax rolls, the government will tell the banks to get lost and give you a fresh start.

Bankruptcy is becoming more acceptable as life is getting harder in America.  America is producing more “working poor” than ever before.  Working hard at a job every day is no guarantee you will be able to pay your bills anymore.  Popular magazines even discuss bankruptcy as it becomes an accepted means of dealing with debt.

How do I know when to file for bankruptcy?

You will probably not realize you need bankruptcy until long after you really do.  The perfect time to file bankruptcy is at the tipping point where your income no longer meets your expenses.  Unfortunately, not many people realize that this is the beginning of the end.  Because of cheap credit options and other means to deal with debt, it might be years before it becomes clear that bankruptcy is the answer.  It often doesn’t even seem like a problem until it’s too late.  Early warning signs are paying a bill late or charging something on a credit card to worry about later.  If the income is not enough to pay expenses now, there will not be extra income to catch up later.  This downward spiral can continue for a very long time.  It is best to realize it early and address the issue.

Do I have to be broke to file bankruptcy?

No!  The biggest mistake people make is spending all their money and running up all their debt trying to avoid bankruptcy.  There is no reason to put off filing until you are broke.  When you file bankruptcy, you get to keep all your exempt assets.  This means that you will almost certainly be able to keep your home and car in bankruptcy.  You also will be able to keep all your household goods.  You can keep your sofa and your dining room table and your refrigerator.  Bankruptcy does not try to punish you.  Bankruptcy wants to leave you all the things you need to get a fresh start.  Bankruptcy is a beautiful program.

How do I keep my stuff in bankruptcy?

The Chapter 13 and Chapter 7 bankruptcy petition asks you to self-report your assets.  There are many ways to do this wrong that will alert the trustee.

Essentially, you make a list of all the stuff you own.  You then assign a “replacement value” to each item.  This is tedious, but it will lend credibility to your petition to do the exercise.  For example, list your couch under household goods and determine what it would cost to replace your couch.  You will also have to list the statute that exempts your couch.  Replacement value on a used couch does not mean you price out a new couch.  You look for a price on a used couch of similar age and quality.  Look on Craigslist or letgo or one of the other many apps and sites for listing and buying used goods.  Once you find a good price, list the used price as the replacement price of your couch.

A trap to stay away from is not reporting anything on your petition.  The trustee will then grill you at the 341 creditors meeting about whose clothes you are wearing because you did not list any clothes on your petition.  There will be questions about your empty house with nothing to sleep on.  Also, you do not want to play games by saying that stuff is not yours.  Nobody believes you are just holding it for a friend.  The bankruptcy court is not trying to take your last nickel.  Just declare the stuff, and it will be fine.

Can I keep my motorcycle in bankruptcy?

Probably.  Every state has a motor vehicle exemption.  You can use that motor vehicle exemption to keep your motorcycle.  For a specific description, please read “Can I keep My Car in Bankruptcy?

Can I keep my house in bankruptcy?

Probably.  Every state has a homestead exemption.  You can use the homestead exemption to exempt the equity in your home.  For a specific description, please read “Can I Keep My Home in Bankruptcy?”  Even if your home value has appreciated and the amount of equity in your home is over the homestead exemption, bankruptcy can still help you.  A Chapter 13 bankruptcy might work better.  Chapter 13 bankruptcy is a powerful debt management tool.

File Bankruptcy Early and Often

Bankruptcy is an amazing tool.  It can help you even more if you realize it early.  The quicker you consider bankruptcy, the better off you will be.  We have professional debt counselors who can chat with you right now.  You can also call or email to schedule a free consultation with an attorney.  You will meet with an attorney, not a paralegal or salesperson.  You will get real legal advice.  The earlier you consider it, the sooner you will see the path back to life for yourself, not your creditors.  Contact us now.