Lawyers.com > Understand Your Legal Issue > Bankruptcy > To File for Bankruptcy or Not: Factors to Consider

You've been thinking that the only way out of your debt-ridden life is to file for bankruptcy. At other times, you're just not sure that bankruptcy is the right way to resolve your problems. The decision to file for bankruptcy is a very personal one, and it is one that should not be made until you have assessed all of its advantages and disadvantages.

Factors in Favor of Bankruptcy

There are a number of factors indicating that it may be advisable for you to file for bankruptcy. While one factor may be of overriding importance, you should still consider all favorable and non-favorable factors before making a final decision. And, you should keep in mind that if you file for bankruptcy now, you will not be able to seek another bankruptcy for eight years. Some factors leaning in favor of bankruptcy include:

• Bankruptcy will result in the discharge of most unsecured debt such as credit card debt. A discharge in bankruptcy is the legal canceling or dismissal of a debt.
• Your home, car and certain other property and your income become exempt from creditors' use of such legal processes as execution and garnishment to collect on debts you owe.
• Bankruptcy allows you to eliminate or modify secured debt such as a mortgage on your home or a car loan.
• You are protected in bankruptcy by an automatic stay that forces creditors to stop all collection, repossession, foreclosure, and utility shut-off actions. A creditor who violates the automatic stay many be held in contempt and ordered to pay you money for damages that you have sustained and for attorney's fees.
• Bankruptcy may allow you to keep your driver's license if it was going to be revoked for nonpayment of an accident judgment against you.
• A Chapter 13 bankruptcy may allow you to save interest charges from accruing on your unpaid tax bill.
• Bankruptcy will protect you from discrimination on the basis of a bankruptcy filing or the nonpayment of discharged debts in actions by governmental units or private employers. For example, a public utility cannot take action against you for an unpaid utility bill that is discharged nor can you be denied a student loan or terminated from your job based on unpaid discharged debts.
• Bankruptcy court provides your attorney with more legal tools to challenge disputed debts with creditors.

Factors in Opposition to Bankruptcy

Despite all the possible advantages, there are number of factors that give a valid reason for not filing a petition for bankruptcy:

• If you own a lot of property that is not exempt, the property is likely to be liquidated or sold during bankruptcy to satisfy your creditors.
• A bankruptcy may affect your credit and reputation because it will become part of the your credit history for 10 years and will be a matter of public record.
• You might be discriminated against as a bankrupt debtor despite the protections against such action, particularly if you live in a small community. If it does occur, you should consult a bankruptcy attorney.
• Your own personal feelings about bankruptcy. But, in considering this factor, you must also weigh the hardship that your family can avoid by pursuing a bankruptcy.
• The costs of bankruptcy. In addition to the filing fee, you will have to pay your attorney, and you may have to pay a trustee's fee, the costs of a consumer counseling briefing and a personal financial management education course and other costs.

Is Bankruptcy Necessary?

Ultimately, you must weigh the advantages and disadvantages of bankruptcy and make a choice. For many people who face real problems that bankruptcy can eliminate, bankruptcy may have a positive effect on their lives. For others with few debts, filing for bankruptcy may be premature when it is possible to negotiate a debt settlement plan with creditors.

The determination of whether to file for bankruptcy or not must be made on a case by case basis, and a lawyer experienced in bankruptcy law can help you assess your options.

Questions for Your Attorney

• Will I have to pay any debts that are discharged in bankruptcy?
• Can I keep my home and my car if I file for bankruptcy?
• How long will bankruptcy be on my credit record?

Related Resources on Lawyers.com^sm

- Bankruptcy and Credit
- Dealing with Debt
- Getting Credit After Bankruptcy
- Bankruptcy FAQs
- Selecting a Bankruptcy Lawyer
- Find a Bankruptcy Lawyer in your area
- Visit our Bankruptcy/Debtor and Creditor Message Board for more help

Related Web Links

- US Trustee Program
- Federal Trade Commission