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| Category: Bankruptcy | September 21, 2017

Filing for bankruptcy is a huge decision, and you should take some time to make sure it’s right for you first.


First, you should figure out if you have any other options besides bankruptcy. If you could change your spending habits or consolidate your debt for a lower interest rate, those may be better decisions that will have less of an impact on your life. If you’re judgment proof, filing for bankruptcy may not be necessary.


There are two types of bankruptcy – Chapter 7 and Chapter 13. The former allows you to eliminate many types of debt within six months, but there could be the loss of some personal property involved. The latter involves setting up a payment plan to repay your debts within five years. When you consider your bankruptcy options, you also need to look into which option you qualify for.

If you make enough money that you could pay back your debts with a Chapter 13 bankruptcy, then Chapter 7 may not be an option. On the other hand, if paying back those debts within five years is unrealistic based on the debt amounts or your income, then you’ll need a Chapter 7 bankruptcy.

Check to see what types of debts you can and can’t eliminate through the bankruptcy option that you choose. Some debts, including tax debts and unpaid child support, stay with you through either type of bankruptcy. If you have high credit card debt, make sure that filing for bankruptcy will get rid of it. Although it often will, this isn’t always the case, especially if you provided inaccurate information on your credit card applications.


Bankruptcy can affect your personal property, and it’s important to find out what assets you could end up losing. When it comes to your home, a Chapter 7 bankruptcy could result in you losing it, but you have a better chance of keeping it with a Chapter 13 bankruptcy. Property exemption laws protect certain other forms of personal property when you file bankruptcy, and you’ll want to check these laws to see what you will be able to keep.

Another factor to consider is if you used co-signers at all for previous loans or credit cards. If you did and you file for Chapter 7 bankruptcy, your co-signers may end up saddled with your debts. You can avoid this by filing for Chapter 13 bankruptcy.

One bit of good news is that state laws usually protect any pension plans and life insurance that you have during the bankruptcy process, which means you don’t need to worry about losing that 401(k) or IRA. Still, it’s wise to double check this before you file and make sure that you aren’t going to lose those.


The final thing you need to keep in mind with either type of bankruptcy is that you’re giving up quite a bit of control to get yourself out of a bad situation. If you go with a Chapter 7 bankruptcy, expect to see at least some of your personal property taken and sold to go towards your debts. If you choose a Chapter 13 bankruptcy, you’ll spend the next several years on a repayment plan and asking whenever you want to spend your money.

It’s not easy to figure out what to do when it comes to a potential bankruptcy. That’s where bankruptcy attorney Tom Pyles can help. He has over 25 years of experience and provides a consultation to go over your situation with you. Click Here to schedule your free meeting.