Drowning In Debt? When Bankruptcy Can Actually Be The Best Solution

Drowning In Debt? When Bankruptcy Can Actually Be The Best Solution
  • Opening Intro -

    If debt has become an overwhelming source of stress in your life, bankruptcy may seem like the only option.

    The only way to know if bankruptcy is your best option is to sit down with a lawyer and clearly identify your financial landscape first.


Before deciding to go ahead with a bankruptcy filing, here are some things to consider about your current situation and the long-term effects of bankruptcy.

Income Level

Recent changes in bankruptcy law mean that consumers are no longer allowed to file for bankruptcy on their own whenever they choose. Instead, they must go through a judge and have approval to file for a specific type of bankruptcy. Chapter 7 bankruptcy will discharge most, but not all, of your debts and Chapter 13 will put you on a court ordered repayment plan to get caught up. The type of bankruptcy you qualify for will be based on your debt to income ratio, and is not necessarily guaranteed to give you a clean slate. If your income level is high enough to make partial payments on past due balances, you may still be stuck with a significant amount of debt to repay.

Type of Debt

As mentioned above, different types of bankruptcy filings serve different purposes. Chapter 7 bankruptcy will wipe out most consumer debt, however it will not discharge child support payments, past due taxes or student loans. For many people, student loans are the source of many financial issues, and cannot be resolved by filing for bankruptcy. However, if your debt is primarily in credit cards and private loans, bankruptcy may still be a viable option.

Savings and Retirement

Filing for bankruptcy will require full disclosure of all financial figures in your life. As a result, it can be very difficult to get approval for bankruptcy if you have money in savings or retirement that could be used toward your debt instead. Bankruptcy should be reserved for absolute worst case scenarios where all other options have been exhausted. If you have reached a point where you have already used your savings and are still in over your head, bankruptcy is the best option left.

Future Planning

One of the biggest problems with filing bankruptcy is the long term effects it has on your credit. It will affect your ability to secure lending in the future, and can leave you without a car or home depending on how your loans were secured. However, Chapter 13 bankruptcy acts as a way to reorganize your debts into a more manageable plan and can give you a pathway to getting caught up without ongoing harassment from creditors. By relieving this stress, you will probably be more successful at getting back on track.

Ultimately, bankruptcy should be a last resort option, but there are times when it serves a legitimate purpose to helping consumers get to a better place financially and prevents them from falling further behind on outstanding debts. When combined with credit counseling and money management classes, it is an extremely useful tool for building future success. It’s important that you consult a bankruptcy attorney, say the experts at Wiesner & Frackowiak, LC, since hitting financial hard times can be overwhelming. Experts can help you file for bankruptcy and get back on track financially.


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