Should You Declare Bankruptcy?

Some things to think about before declaring bankruptcy!

Because Chapter 7 can be so devastating, and can only be done once every seven years, it might be smart to weigh your particular combination of debt, income, and property before you decide it’s the option for you. And even then you might decide against it.

How Declaring Bankruptcy Can Help

Typically those who file for bankruptcy really do need it. Often the filer is already in a fragile economic position with large amounts of credit card debt when they are suddenly stuck with a bout of hard luck such as a loss of job, injury, divorce, or uninsured medical expenses that then result in mounting penalties and thus an unpayable amount of debt.

Bankruptcy law was designed to help people who need assistance to make a clean and quick break from the debt. In a few months it can wipe out unsecured debt such as credit and medical debts.

Exemption

But even if you find yourself faced with unpayable debt, you still may not need bankruptcy to protect your assets. Under the Exemption Laws of California, you may already be “judgment-proof.” If you are declared as “judgment-proof” you need not fear credit card companies simply because of debts owed tothem. Unsecured creditors such as credit card companies cannot take your stuff if it’s exempt. Harassing phone calls can be stopped with a simple phone call or letter. But it’s important to remember that interest and penalties will continue to accumulate. Also, exemption laws do not protect property from all types of debts or all types of creditors. Typically, exemption laws do not protect against collection of child support or tax debts. And if you purchased property and pledged it as collateral for the purchase-money loan the lender can still take the property, regardless of any exemption law.

Non-dischargeable Debts

It’s important to remember there are some kinds of debts that bankruptcy can’t get rid of called “nondischargeable” debts. This type of debt generally includes child support, most student loans, and most tax debts. Even if you decide to declare bankruptcy you are still liable to pay these.