Recently on our bankruptcy forum a user asked, “I have several debts I cannot pay and creditors are hounding me. I know that bankruptcy is not the right choice for everyone. What are some reasons I should consider for NOT filing bankruptcy?”
Before filing Chapter 7 bankruptcy it’s important to understand what it can and cannot do for you. Yes, it may be able to protect you from certain creditors, allow you to eliminate certain debts, give you a fresh financial start, allow you to rebuild your credit, and potentially improve your life, it is not, however, the best choice for everyone.
Filing Chapter 7 Bankruptcy may be a good choice if the following is true:
- Creditors are calling you nonstop and demanding payments.
- Auto lenders are threatening to repossess your cars.
- Your debts are dischargeable and include unsecured personal loans, credit card payments, or medical debts
- You will not be able to repay your debts over the next five years.
- Creditors are threatening to file lawsuits against you.
- You have suffered a major crisis such as death or divorce that has threatened your financial future.
Now, the list above offers a few situations when filing bankruptcy might be the perfect choice for you. Let’s review a few reasons that bankruptcy may not be the best decision.
Filing Bankruptcy may NOT be a good choice if the following is true:
- You have the money to repay your debts.
If possible, repaying your debts is generally the best option. Not only did you contractually agree to repay your loans, there are long-term consequences for filing bankruptcy that can be avoided when you repay your debts.
- You don’t have anything to repossess or levy.
Some debtors may not need to file for bankruptcy because they are considered “judgment proof.” What this really means is that they have no income to garnish, property to repossess, or funds to levy. Although you might be harassed by creditors, if you don’t have anything to collect it won’t matter if a creditor has a judgment against you.
- Your debt cannot be discharged.
Another consideration is whether or not your debts can be discharged in bankruptcy. Filing Chapter 7 bankruptcy will discharge certain unsecured debts such as unsecured personal loans, medical debts, and certain credit card charges. Other debts, however, cannot be discharged.
If you only have recent tax debts, school loans, and child or spousal support payments filing bankruptcy may do very little for you.
- You have defrauded your creditors or have purchased luxury items.
There are certain reasons the bankruptcy court may not allow your debts to be discharged. For example, a discharge may not be allowed if you intentionally try to defraud your creditors or you make large purchases right before your bankruptcy filing. If you have questions about your right to a bankruptcy discharge talk to a bankruptcy lawyer before you file.
- You have filed bankruptcy within the last eight years.
Debtors cannot file Chapter 7 Bankruptcy a second time if they have received a discharge within the past eight years.
While filing bankruptcy may allow some debtors a fresh financial start, it is not the right choice for everyone.
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