Is Filing Bankruptcy Right for Me?

The decision to file a Bankruptcy or to consider it is a business decision.

Corporations don’t fret about it. They look at the facts of their business. If it works best for them they don’t hesitate.

Payless Shoes recently filed a Bankruptcy and within a short time they immerged as a strong solvent company.

United  Airlines and Delta Airlines filed bankruptcies. They are now strong and  solvent companies making millions of dollars each year.

General  Motors filed Bankruptcy. Not only did it save the American Automobile  Manufactory Industry it is the 2nd largest automaker in the world.

Individuals and Small Businesses frequently hesitate or don’t file Bankruptcy for various reasons:

  1. They  think that by filing a Bankruptcy it is an admission of failure. Some  will just continue to be crushed by debt. Filing Bankruptcy is not a  failure it is a solution.
  2. It is a stigma. Even without  knowing it you have friends, relatives, and co-workers who filed  Bankruptcy. Even if you know someone who has filed Bankruptcy do you  really think less of them?
  3. Filing Bankruptcy is a moral  problem. Consider the credit industry: they are ruthless in collecting  debts and have no thought if they will ruin someone’s life. Our current  President has been involved in 4 or 5 bankruptcies. He has said  Bankruptcy is a business tool.
  4. It will ruin my credit.  Generally when considering Bankruptcy one’s credit score is low. Studies  show that within 6 months of filing a Chapter 7 credit scores jump and  will likely continue to jump. After 2 years if you pay your bills on  time you can return to a score of 725 to 750.
  5. I won’t be  able to get credit in the future: not true. After decades of helping  clients file Bankruptcy I know so many of them now have bought houses,  good cars and have credit cards. Credit will be offered to you right  after filing a Chapter 7 bankruptcy. But, of course, one has to be very  cautious going forward.
  6. I will lose my house and/or car  and/or possessions. This very, very seldom happens. For 99% the net  value of assets is well under allowable exemptions. If one has assets  like equity in a home over and above allowable exemptions a Chapter 13  can be filed. Even if one has assets a Chapter 13 plan can have more  affordable payments.
  7. I owe money to the IRS. IRS debt can  often be discharged in a Chapter 7. If all or part is not dischargeable  a Chapter 13 allows a payment plan without future interest nor  penalties.
  8. My income is too high for a Chapter 7. For  Consumer Debtors there is “Means Test.” Skilled and experienced lawyer  can defeat it or minimize the impact. Skilled and experienced lawyers  have very often defeated the Means Test to allow clients to file a  Chapter 7. Many other so-called high income clients pay less than 100%  of their debts over a period of 5 years. Even if you have to pay all  creditors back 100% you stop future interest with an affordable monthly  payment. See: this link.
  9. Creditors  have told you that you have contractually agreed not file a Bankruptcy.  Such contract clauses are void. Creditors cannot stop you from filing  Bankruptcy. See 1 U.S.C. § 524(a)(1) and (2)
  10. I am trying  to get a Loan Modification with my mortgage company. Neither a Chapter 7  nor a Chapter 13 is a deterrent obtaining a Loan Modification.

Time after time clients tell me “I don’t know why I waited so long?”

The  issue for individuals should be to look at their finances. With my  current income and with ordinary living expenses can I repay my debts in  a period of, say, 3 years? Look at the math: assuming an average  interest rate of 19% and paying the minimum of 4% it will take 137  months (11.4 years) to pay it to zero. Considering Bankruptcy is a  business decision the same as Corporations: is it in my best interest?

Most  lawyers who concentrate their practice in Consumer Bankruptcy and Small  Business Bankruptcy offer Complimentary consultation. You can look at  the options and make your own decision.

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