Bankruptcy is not always your best option but it can be a life changing event. Generally, if you fit the criteria for several if not all of the following 5 points, you should consider bankruptcy. We’ll focus on Chapter 7, with some notes on Chapter 13 too.
Approaching Retirement
The older you are, the more the advantages you have of filing Chapter 7 or Chapter 13 bankruptcy. There is much more to it, but if you are facing debts which will cause you stress, anxiety, and money issues for the rest of your life, you should consider bankruptcy. A Chapter 7 bankruptcy is quite effective when you owe more than you cannot pay back in a reasonable amount of time, usually about 3 years. If you have a lot of assets and dependents, Chapter 13 bankruptcy may be better.
More Dependents
The more who depend on you, the greater the effect of bankruptcy. If you have a large family, for example, and a $50,000 medical debt hanging over you and a mortgage to pay, you may consider Chapter 7 bankruptcy. If you are single or a couple and you both work, Chapter 7 bankruptcy can still be a very smart decision. It’s just if you have others who depend on you to put food on the table, cash reserves are important.
Higher Your Debt
Another logical point: the more you owe, the more bankruptcy can help. While bankruptcy cannot discharge all your debts, it can discharge major credit and medical debts. If you owe a $25,000 credit card bill and recently lost your job, you may consider Chapter 7. If your family lacks insurance and your spouse is in the hospital for weeks, it can be impossible to pay these fees.
Less Income
As noted, the less money you have, the more bankruptcy can help. It is important to note your savings too. You may have some emergency or retirement monies, such as in an IRA account. You might consider cashing these out in order to avoid bankruptcy. Think twice before you spend money designated for your future. Filing bankruptcy can often be much safer than spending your whole savings.
Can you pay off in 3 years?
Finally, consider how soon you can pay off these debts. If you can pay it off in 3 years or less without spending all your savings and income, you may consider paying it off. On the other hand, if you the debt is simply impossible, Chapter 7 bankruptcy can be a big help.
