When times get tough for you financially, and you cannot see light at the end of the tunnel, you may know that it is time to take action. The big question is how? Bankruptcy is one of the options you could choose from, but it can be hard to know if this is the right choice. Here are three important questions to ask yourself before you make the decision to solve your financial problems by filing bankruptcy.
Are You Behind On Your Bills?
The first thing to look into is the status of your debts and bills. Can you afford to pay all of them each month? If you're having trouble paying the bills you have and still having money to live off of the rest of the month, it might be a good indication you are in a serious financial state.
Another indication of this involves the way you are handling your credit cards. If you are transferring balances on your credit cards just to make your payments, or if you are only making minimum payments, you might need to do something quickly.
You should also consider if you are using your credit cards to pay for normal everyday expenses. If so, your balances will continue to rise, which means your payments will also rise, and this can make it even harder to pay your bills.
Do You Have Unsecured Debts?
The second thing to consider is the types of debts you have. If you really do not have any debts and are just having a hard time paying your rent and utilities, bankruptcy will not really help you. Bankruptcy can help you, though, if you have a lot of unsecured debts, such as credit card bills.
Chapter 7 bankruptcy is helpful because it eliminates unsecured debts. If you use this branch of bankruptcy, your unsecured debts will most likely get wiped away, and you will never have to repay them. This could free up cash in your budget, which could help you pay your other bills easier.
If all the debts you have are secured or excluded debts, bankruptcy won't help you. For example, if you owe the government back taxes and owe money on student loans, bankruptcy will not discharge those debts. You will have to continue paying them, even after you file.
Will You Be Receiving A Large Lump Sum Of Cash In The Near Future?
The final issue to examine before filing involves cash windfalls. If you are expecting any type of cash windfall within the next 180 days, you should be prepared to give up this money to the trustee.
For example, if your grandma recently passed away and left you an inheritance, you will have to disclose this detail at your bankruptcy hearing. The trustee will then have the right to ask you for this money so it can be used to repay your discharged debts. This also includes money you receive from your next tax refund, lottery winnings, or lawsuit settlement.
You should also realize that in order to qualify for Chapter 7 bankruptcy, you will have to disclose all your income from the past six months. If you have received a cash windfall during this time, it may push your income over the limits. This would prevent you from being able to file Chapter 7.
Choosing to file bankruptcy can be helpful during tough financial times, but it is always important to fully understand how it will work before you use it. To learn more about bankruptcy, contact an attorney (like Richard S. Ross - Bankruptcy Attorney) in your area that offers bankruptcy services.