How To Tell If Bankruptcy Is The Right Choice

14 March 2022
 Categories: Law, Blog


The prospect of filing for bankruptcy can leave you feeling confused. Many people are unsure whether it is an option given their circumstances. Likewise, they're often unclear on whether filing would be the right choice. Bankruptcy attorneys encourage clients to examine these four elements of their financial lives before deciding.

Overwhelming Debts

Fundamentally, bankruptcy is a legal tool to ensure people aren't permanently crushed by their debts. If you feel like there's no light at the end of the tunnel when it comes to paying off your debts, there's a decent chance you may want to consider bankruptcy.

That is especially true if you're unable to even pay down the interest on what you owe. If your situation has reached the point that your debts are growing without you adding to them, you should start looking for bankruptcy attorneys who offer consultations.

Constant Notices and Collection Calls

Another potential sign you may want to pursue bankruptcy is when creditors are constantly hounding you. If you receive notices electronically and by mail almost daily, for example, you may be approaching the point where full payment is no longer an option. The same goes if creditors are constantly making collection calls.

Notably, the bankruptcy system includes an order preventing harassment while the court is processing a case. As long as you name a creditor in the petition, the judge will likely enter an order barring them from any collection actions until the case concludes. Usually, this means the end of collection actions because the court will discharge the debts at the end of a successful case.

Low Income

The threshold for qualifying for Chapter 7 is an income that is less than your state's median income. While it's not quite automatic, judges rarely question petitions established on this basis.

Even if you don't meet the preferred threshold, you may still have a solid case. However, the court will expect you to undergo a means test. This means the court will review your income and debts to determine whether bankruptcy is an acceptable solution to your financial concerns.

Exhaustion of Alternatives

Many creditors are willing to refinance or restructure some debts to ensure debtors can keep their payment obligations. If you've already pursued this option and gotten a no, you may need to use bankruptcy to address the situation. Similarly, if you have tried this approach and still haven't gotten ahead, it may be time to explore bankruptcy. Hire a bankruptcy attorney to help you out.