Four Questions to Review Before Settling on Bankruptcy

Four Questions to Review Before Settling on Bankruptcy

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Bankruptcy is just one option out of several debt relief options. Some consumers choose bankruptcy the moment they start having problems with debt. Although bankruptcy is an effective option, it may not suit the needs of every debtor. The following are four questions a person should review before settling on bankruptcy as a solution:

Why Am I Having Difficulty Paying Debt?

A debtor should answer himself or herself honestly about the reasons behind the debt problems. Some consumers have poor organizational skills. Other debtors are not fully educated about credit and debt. Such people may benefit from a debt relief product such as debt consolidation, debt management or credit counseling. Bankruptcy is not always necessary for a person to straighten out debt problems. Sometimes, a small amount of education or a merging of the accounts can go a long way. 

How Much Debt Do I Have?

A bankruptcy filing does not require a specific amount of debt. However, other programs may be more suitable for a debtor who has a certain amount of debt. Therefore, adding up one’s total debt is crucial in the process of deciding on which way to turn for debt repair. When the debtor is calculating a figure for debt, he or she should include unsecured debt such as credit cards, automobile loans, payday loans, installment loans and the like. Getting the right figure is paramount to finding the right debt repair help. 

How Much Money Do I Earn?

Calculating one’s income figure is important in assessing that person’s ability to repay debt. Seeing a way out of overwhelming debt is often unclear until the debtor performs these calculations. Total monthly income includes income such as regular employment, contract work, unemployment benefits, Social Security benefits, alimony and more. A debtor cannot qualify for Chapter 7 bankruptcy if he or she earns more than the state median. Lawyers such as D Thode & Associates can help a debtor to calculate this figure. 

How Much Money Do I Have?

The disposable income figure is the most important figure in the bankruptcy decision. The disposable income figure tells a debtor whether he or she has enough money to make payments. To calculate one’s disposable income, the debtor or the attorney will need to subtract the debtor’s total monthly bills (rent, cable, etc.) from his or her monthly income. A person who has little or no disposable income does not have the ability to repay debt, and that person would qualify for Chapter 7 bankruptcy if he or she meets the other criteria. A Chapter 7 bankruptcy filing may excuse the debtor from paying a large portion of his or her debt. 

A person who has a generous disposable income may have the ability to pay back some of his or her debt. That person would not qualify for Chapter 7 bankruptcy, but he or she may qualify for Chapter 13 bankruptcy. A Chapter 13 bankruptcy requires a repayment agreement that the creditors would be likely to accept. A reliable bankruptcy attorney could help the debtor to develop a repayment agreement that can work. The bottom line is it’s essential to review your options before settling on bankruptcy.

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