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Is Bankruptcy For You? What To Keep In Mind

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If you feel that you are drowning in debt and fear that you will never get caught up with your bills, filing for bankruptcy could be a possible solution for you. No one wants to declare bankruptcy, but this legal option for making a fresh financial start can allow you an opportunity to make a new and better financial plan for your future. Bankruptcy is not the right answer for everyone, however. Read on to learn more about the key factors to keep in mind when deciding whether or not to pursue a bankruptcy filing.

1.  Credit Card Debt

If you owe a large amount of credit card debt, you are not alone. Making even the minimum payments each month can lead to a nightmare of juggling bills and constant calls from debt collectors. Since credit card debt is considered unsecured debt, all credit card debt has the potential to be wiped out with chapter 7 bankruptcy. A bankruptcy filing will affect your ability to get all types of new credit, including credit cards.

Keep in Mind: If you are behind on your credit cards, you credit has likely already been negatively affected. Once your bankruptcy is discharged, however, you will eventually be able to acquire more credit and hopefully you will be able to do so in a more responsible manner.

3.  Mortgage Debt

The prospect of losing your home can be catastrophic and overwhelming. If you have been unable to work out a loan modification with your mortgage lender, you may well be in danger of losing your home to foreclosure. Filing for bankruptcy can halt foreclosure proceedings, if only temporarily. However, failing to get caught up on your mortgage payments may lead to a surrender of your home to the bankruptcy trustee.

Keep in Mind: With a bankruptcy filing, you could have the opportunity to get caught up on your mortgage payments, since you will have more cash available from not having to pay other debts, such as the minimum credit card payments each month.

3.  The Means Test

Your income could be a major stumbling block in filing for bankruptcy. The bankruptcy courts use a calculation based on your state's median income and your previous six months of income. If your income is higher than your state's median, you may not be allowed to file for bankruptcy.

Keep in Mind: Even if your income is higher than your state's median, there are other qualifying factors that could still allow you to file. Some of these factors include:

  • Large mortgage payments
  • High healthcare expenses
  • Large car payments
  • High childcare expenses
  • Large tax debt (such as an IRS Installation plan debt).

This important decision should not be taken lightly, so consult with a bankruptcy attorney to assist you. For legal help, contact a lawyer such as Curtis A. Anderson, Attorney At Law.


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