Struggling with Debt: Considering Filing for Bankruptcy

Posted on Sep 19 2013 - 10:57am by David Drasnin


Are you struggling with debt and thinking of filing for bankruptcy? Well, the decision to make such a crucial step should not be taken lightly and both the benefits and the negatives of its consequences should be carefully taken into account. Weighting up the various alternatives is essential when attempting to save your business and to plan for minimal loss along the way. A curious notion to consider is that as long as you have good earnings and you keep good credit history within two years after the bankruptcy, you will be able to enjoy a good credit score, somewhere in the high 60s or even in the mid 70s and thus you could even start planning on investing in your own house.

When applying for bankruptcy, it is quite possible that luxury assets or possessions will be lost in the process depending on the exemption limit or tolerance of the State you live in. For instance if you file bankruptcy under Chapter 7 you could avoid paying to all your unsecure debtors and you could get to keep your property. However filing for bankruptcy won’t free you from certain debt obligations including spouse and child support, student loans, shared spouse debts that remain outstanding after the divorce, fraudly incurred debts like ones incurred within 90 days before filing for bankruptcy, etc.

A good research will send you on the right path, well of course you could also look for an experienced bankruptcy specializing lawyer – that would definitely make the things easier. However, the best approach is to educate yourself on the subject and get into the terminology before reaching out for professional assistance. For instance you could look closer into the three main chapters that you may file for bankruptcy and learn some more about their positive and negative sides. For example in order to conclude whether filing for bankruptcy is right for you or not, there are a few questions you should ask yourself. Be sure to supply only honest answers as they will help you make the right decision. You should assess the family earnings (yours and your spouse’s) within the past six months. An essential thing that you’d be asked by your attorney is when the debt was actually incurred – is it a result of you losing your job, or having recently invested in a significant purchase. As to select the optimum chapter under which you should file for bankruptcy you should also calculate your average monthly living expenses.

If you have reasonable grounds to believe that your business will be striving and will become a profitable venture, your best option will be to file for bankruptcy under Chapter 11. You will have a special repayment plan set that you could even repay in advance if your company earnings allow it. The regulations under Chapter 11 allow the debtor to withhold valuable assets that prove to be indispensable for the everyday operation of the company. In return one should attempt to prove to the court that he will be able and he is planning on fully or at least partially meeting his debt obligations within the set repayment period.

However if the case is rather the opposite one, namely you strongly doubt it that you could succeed in bringing up a flourishing business, then you most probably should look into the Chapter 7 alternative. It will help you easily set free from your debts and eventually close your company. Keep in mind though, that if you are enjoying a good enough monthly budget without covering your unsecure debt, you’d be obliged to comply with the Chapter 13 regulations. This type of debt consolidating system is usually fixed to a certain period of time: between 3 to 5 years. Within that period you will be assigned a bankruptcy trustee to whom you should render your disposable income (the amount of money that remains after you cover for your monthly living expenses), so that he will distribute it among your creditors. Quite often you will not have to pay the whole due amount, especially if your earnings do not allow it.

As you can see filing for bankruptcy on certain occasions may really offer you the fresh start that your business needs. You just need to find a reliable and trustworthy counsellor or attorney who will walk you through the process. The term Bankruptcy might sound a bit dreadful, but once you look into the big picture you could make an educated decision and realize that this approach would bring you more positives than if you continue on struggling and avoiding it. Think of it as a safety vest that will help your business emerge once again above your debt burden and resurrect stronger than ever before.

Photo Credit: Flickr/Brent Payne

About the Author

David Drasnin is a freelance writer who is always striving to learn new things and to self-educate himself on a broad range of subjects. Always keeping busy David is currently engaged on multiple projects including working with Paul Stanely - San Diego Bankruptcy Laywer.