How to Decide if Bankruptcy is Right for You and Your Situation

There are several things bankruptcy can do and several things it cannot do. Bankruptcy can discharge most unsecured debt such as credit cards, past due utility bills, business debts, medical bills, and civil court judgments. 

Secured debts such as mortgages and auto loans can be discharged if you no longer want to retain the property. Bankruptcy cannot discharge debt for child or spousal support, student loans in most cases, restitution owed for damages or injury to others, payroll taxes, and more.

Qualifying for Bankruptcy

Debts discharged in bankruptcy can depend on the type of bankruptcy you file. Chapter 7 discharges all allowable debts and leaves you with a clean slate. Chapter 13 is debt-consolidation that allows you to pay off your debt within a few years. 

Chapter 11 is similar to chapter 13 except it's applicable to businesses. For the best information on dischargeable debts that are specific to your situation and the type of bankruptcy you should file, you should contact a bankruptcy attorney. 

Professionals, like those at the Law Office of Barbara B. Braziel, realize that The Bankruptcy Reform Law of 2005 tightened the filing eligibility by establishing a means test for filing bankruptcy. 

As a result, fewer people are now eligible to file for bankruptcy. Your income must be less than the median for your state in order to file. If it exceeds the median for your state and you have money to pay some of your bills, you are ineligible to file.

Determine if Bankruptcy is the Solution

If you're eligible to file, you might consider a few more criteria to determine if this is indeed the best solution for you. Bankruptcy has long-lasting ramifications, so it should be the last option rather than the first one. 



You'll be required to obtain financial counseling and the negative impact will be on your credit report for at least 10 years. You must be comfortable with the concept of walking away from legitimate debts and realize that you may feel guilty for doing so.

Consider Other Options

There may be options other than bankruptcy that would work for you. Instead of filing for chapter 7, you may be able to file chapter 13 and pay off most of your creditors. 

This would be significantly less detrimental to your credit score. If you can foresee an improvement in your financial situation in the near future, you might want to delay filing bankruptcy.

Make Permanent Changes

Often, filing bankruptcy is only a temporary solution because an individual's poor financial habits don't change. 

If you decide to file, you should seek credit counseling so that you don't end up in the same financial quagmire in the future. Making positive changes to your financial attitude is the best solution to avoiding bankruptcy.

Sometimes, situations occur that necessitate filing for bankruptcy. Often, it's circumstances over which you have no control, such as a catastrophic illness or accident. 

If filing for bankruptcy is the best solution for you, then by all means avail yourself of it, but realize that it's a temporary solution and do your best to change your future financial habits.