If you lose your job, and you’re facing overwhelming debt, you might be tempted to file for bankruptcy. While filing bankruptcy after a job loss makes for good timing, and while bankruptcy might be your best option, there are still many things to consider before filing your petition. Take the following things into consideration when trying to decide if a bankruptcy petition is the best option for you.
Do You Have Nonexempt Assets?
Your first step when deciding whether or not to file for bankruptcy should be to figure out how much of your property and assets are exempt. When you go to file for bankruptcy, you’ll have to list out your bank accounts, assets, property, and other pertinent information. If your creditors want to sue you, they’ll try to go after what you have to see if they can sell it or claim it to pay down your debt. However, state laws exist to help protect consumers, and much of the time these laws allow you to file for Chapter 7 without having to give up a thing. That being said, if you have a lot of non-exempt property, you’ll probably want to find an option other than bankruptcy.
Should You File For Chapter 13?
If you do have a large amount of nonexempt property or assets, bankruptcy isn’t entirely out of the question. Instead of a liquidation bankruptcy, or Chapter 7, you can also file for a restructuring of your debt, which is Chapter 13. Under Chapter 13 bankruptcy, your debt isn’t wiped out, but you are allowed to come up with a three- to five-year repayment plan wherein one monthly payment goes towards all of your creditors. For some people, this option is preferred because it lets them keep their property.
Will You Be Employed Soon?
If you’ve experienced a long stint without work and you don’t think you’ll find employment shortly, then you might want to file for bankruptcy. However, if you’ve just lost your job, and you don’t have a substantial amount of nonexempt property, you might want to wait it out. You can only file for bankruptcy so many times, and you have to wait a certain amount of time between filings, usually over a year. If you file for bankruptcy too soon, and then you accrue more debt over an extended period of unemployment, you’ll be saddled with those debts for a long time. It might be best to wait it out until you have accrued the majority of the debt you feel you’ll end up with over the course of your unemployment.
What Are Your Other Options?
Before you decide to file for bankruptcy, make sure you’ve thoroughly investigated your alternative options. For one thing, you can contact creditors and ask them to restructure your debt into payment plans. This option is similar to a Chapter 13 bankruptcy plan but without the hassle and court proceedings. Another option is to refinance your home and use whatever you make to pay large lump sums to your creditors. You can also contact your local credit counseling service (CCS). These companies can work with your creditors to negotiate a repayment plan. Again, this is similar to a Chapter 13 repayment plan but saves you the paperwork and court appointments.
As always, make sure you discuss your options with a qualified legal professional. Only a bankruptcy attorney can help you make the best decision for your individual case. However, considering the items listed above can help you decide whether or not you want to pursue bankruptcy during your unemployment.
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