QUESTION
How do you know if you should file for bankruptcy?
Asked on Mar 14th, 2013 on Bankruptcy - Michigan
More details to this question:
How bad does debt have to be to file for bankruptcy? How do you know when it's right to do it? How bad is it for your credit? Will I ever be able to buy a home or car again?
10 ANSWERS
There is no minimum amount to file for bankruptcy - it just depends on your ability to pay your debt. $50,000 of credit card debt may be a lot for you, but not if you make $300,000 year. Conversely, $5,000 may be a lot of debt to someone on minimum wage, unemployment or with no resources. The biggest myth ever is that bankruptcy is bad for your credit. Someone needing to file bankruptcy already has horrible credit worthiness or is well on their way. Bankruptcy turns things around by discharging liability to pay back debt and allows one to rebuild credit.
Answered on Apr 03rd, 2013 at 9:06 PM
You can file bankruptcy with any amount of debt. It can affect your credit for up to 10 years, but many credit unions and car lenders will finance you much quicker than that. FHA, VA, HUD house loans, for example, generally ignore bankruptcies after 2 years.
Answered on Mar 20th, 2013 at 11:21 PM
Construction Litigation Attorney serving Mission Viejo, CA
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Law Office of Christian F. Paul
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The best way to find out if bankruptcy is right for you is to make an appointment with a local bankruptcy attorney, take with you whatever documents he or she requests, and listen to the advice. Many attorneys give a free consultation, and what you find out could be very helpful to you. The bankruptcy will show on your credit report for seven years, but your credit score might actually improve once the debts are listed as zero, and you probably will receive credit card applications without asking for them. You can ask the attorney specific questions about these things when you visit him or her. Good luck.
Answered on Mar 17th, 2013 at 10:47 PM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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The time to file is when your debt burden feels too heavy to bear. There is no dollar limit, maximum or minimum, to file in general. Under Chapter 13, your secured debts must not exceed about 1.1 million dollars, and your unsecured debts must not exceed about $360,000.00. Filing a bankruptcy is bad for your credit, but exactly how bad depends on many factors. You can often regain your prior credit score, or better, if for 30 months after filing bankruptcy you are meticulous about paying every single bill which you still get (rent or mortgage, utilities, etc.) strictly on time. No law prevents your getting a home loan post-bankruptcy, but the more time that passes after the discharge, the better your chances are of improving your credit score. Some people borrow at rather high rates, and after two years apply to refinance at then current rates.
Answered on Mar 17th, 2013 at 6:06 PM
Estate Planning Attorney serving Wilmington, DE
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Reger Rizzo & Darnall, LLP
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That is a personal decision but you have to qualify by passing a means test and the income/expense test. It will be on your credit for 7-10 years and after several years you should be able to buy a home.
Answered on Mar 15th, 2013 at 10:54 AM
Deborah F. Bowinski
You are asking very good questions, but the answers will depend upon your particular circumstances. In general, when you owe so much debt that you are unable to make progress in paying down the balances and paying everything off within a few years time it makes sense to consider whether bankruptcy is a reasonable option.
Answered on Mar 14th, 2013 at 3:56 PM
Bankruptcy Attorney serving Livonia, MI
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Charles J. Schneider, P.C.
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You file bankruptcy when you can no longer pay the debt.
Answered on Mar 14th, 2013 at 3:55 PM
To know whether you file bankruptcy, compare the debt you would eliminate by filing bankruptcy with your annual income. If you owe 1/3 or more of your annual income in debt other than your vehicle loan and other secured debt you want to keep, you may want to consider bankruptcy. Next, consider your budget. After paying your living expenses, what is left over? Take that amount, multiply it by 60 (representing payments over 5 years). If that total is more than 25% of your debt, you probably won't qualify to file Chapter 7 but you could potentially pay a portion of your debt off (interest free) in a Chapter 13.
Answered on Mar 14th, 2013 at 3:54 PM
2 Awards
It will cost you about $2500 to file if you're eligible for a chapter 7. If you must file a chapter 13 due to your income it will run you about $4500 and you will need to make monthly payments for 60 months. The facts of your case will determine whether it is financially prudent to file bk. You will be able to restore your credit and purchase items on credit again.
Answered on Mar 14th, 2013 at 3:54 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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You need to consult, with full details, with an attorney. There is no single answer, and yes, there is life after bankruptcy following the passage of time and re-establishment of credit it is possible to purchase a car or home. Generally that will take a number of years to accomplish.
Answered on Mar 14th, 2013 at 3:53 PM