Is bankruptcy the right course of action for your financial situation – and if so, which type?

This is a question that many individuals, families, and businesses face at some point or another. If you’re struggling with debt and looking for somewhere to turn, bankruptcy may be a viable solution. Broadly speaking, bankruptcy is a way for individuals and businesses to discharge debts and get a fresh financial start.

For individuals, there are two primary types of bankruptcy to know about, Chapter 7 and Chapter 13. In Chapter 7, most of a person’s debts are discharged or restructured over the course of a process that generally takes less than a year; in Chapter 13, filers use their income to pay down debts in line with a management plan, often over the span of a few years.

In any case, as you continue to research bankruptcy, it’s important to continue asking if this process is right for you. So, is declaring bankruptcy a practical option for you? Here are five questions worth asking:

Are You Eligible for Bankruptcy?

One of your most pressing questions as you weigh whether or not bankruptcy is the right option for you might be: “Am I allowed to file?”

In reality, not everyone is permitted to file for bankruptcy; certain qualifications have to be met. Before you may file for bankruptcy, there is paperwork that needs to be completed, including a “means test” which gauges your eligibility.

A major deciding factor is your household median income. If your household income falls below the median income for Illinois households — whether you are a one person household, a family of six, or something else — you almost always qualify for a Chapter 7 bankruptcy, for instance. There are other factors at play, as well – allowable expenses, secured vs. unsecured creditors, the mathematical formulas used for means testing, and more.

It’s a lot to consider on your own. One of the easiest ways to determine if you qualify may just be to reach out to experienced bankruptcy professionals, like the team at the Gunderson Law Firm. No need to search for all the variables and hope you don’t miss any key detail — just get in touch, and we will tell you, with straightforward answers about your unique personal situation.

Is It Possible to Deal With Your Debts Outside of Bankruptcy?

You may hear bankruptcy referred to as a “last resort” option for consumers and businesses facing debt. While it is an effective strategy for helping many consumers hit “refresh” on their financial lives, it isn’t right for everyone. For some, there are other options out there, alternatives that should at least be considered before beginning the filing process.

In certain situations, you may be able to work directly with your creditors, create a debt management plan, or consolidate debts in order to gain some financial relief.

Beat in mind that these options won’t work for everyone. At the same time, there are scammers out there looking to make a quick buck on the backs of consumers seeking debt management or consolidation options. It pays to be vigilant. Whether you’re interested in pursuing bankruptcy as a strategy, or are looking for an alternative that might work for you, seeking out the guidance of an experienced attorney is a great starting point. A legal professional may be able to offer you answers to many of your most pressing questions, guided by a legal and ethical obligation to act in your best interests.

What Types of Debt Do You Have?

Just as it’s important to realize that not everyone will qualify to file for bankruptcy, bear in mind, too, that bankruptcy is not the solution for every type of debt.

Certain debts cannot be discharged automatically in bankruptcy; primarily, we’re referring to things like secured loans and debts, child support obligations, student loans, and a few other types of debt.

However, you may not want to let this fact stop you from considering bankruptcy as a solution. Many types of debt can be discharged, including unsecured credit cards, medical bills, and others. With these debts discharged, going through bankruptcy may allow you to restructure your remaining debts, making them less of a burden and allowing you to move forward with a much more manageable financial situation.

Are Your Debts Affecting Other Aspects of Life?

One big question to ask yourself as you weigh the pros and cons of bankruptcy: Are you reaching the end of your rope? What will happen, in the short-term and long-term, if you do not take steps to discharge or restructure your debts?

For instance, do you not have any disposable income because of personal debts? Are your financial troubles affecting other aspects of your life, such as your health, wellbeing, or personal relationships? And, finally, are you facing serious consequences if you fail to act – such as default judgments, lawsuits, or the threat of foreclosure or repossession?

All of these are important factors to weigh as you make a decision about bankruptcy. If your situation seems likely to continue to spiral, with no likelihood of improving in the near future, it may be time to consult with a professional about your options.

Are You Ready to Make a Commitment?

As we’ve noted already, filing for bankruptcy is a way to head into the next chapter of your life with a clean slate, and a bit of breathing room afforded by getting a handle on your debts. But it’s important to remember that hitting “reset” on your financial life will not happen overnight.

Instead, bankruptcy is a process that will impact your life for a substantial amount of time. You may need to give up property. In other cases, your credit may be affected, and there could be limits on when you’re allowed to buy a home or make other major financial decisions for yourself. Remember, too, that the fresh start afforded by bankruptcy requires a commitment to making substantive changes. Bankruptcy can be a positive step in the right direction – provided that you do not lapse into old habits or make costly missteps.

At the Gunderson Law Firm, we will take all steps possible to protect you and your assets immediately and throughout the bankruptcy process, but we can also counsel you on realistic ways to avoid such serious debt issues in the future.

Want to Talk About Your Next Steps?

Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you so you can enjoy life again.

The Gunderson Law Firm is available to offer assistance in a clear, sensible fashion, and help relieve you of the burden of overwhelming debt in whatever way works best for you.  Don’t hesitate to drop us a line or give us a call for your free initial consultation.