Should I file for bankruptcy?
When asking yourself if you should file for bankruptcy, it can be incredibly overwhelming. It’s a huge decision and you probably feel lost about how to look at it or what to consider.
To me your considerations about filing bankruptcy really shouldn’t be centered around any emotional aspects of your life. Forget the ethical and moral part of the equation for a moment and instead take an objective and realistic approach when investigating your alternatives to bankruptcy. Consider the path, the risks, the costs, the amount of time it will take, the period of recovery, and the probable outcome.
I know you don’t want to file bankruptcy, otherwise you wouldn’t be reading this. But if you can’t settle your debts in less than 24 months, and ideally in 12 months or less, you should meet with a bankruptcy attorney and a debt management company (CCCS) and weigh those two options against each other.
Any debt settlement program that is longer than 24 months shouldn’t even be considered, since less than 10% of consumers who attempt long-term debt settlement programs complete them.
The most reliable way to avoid bankruptcy…
Is to find a way to generate enough funds to settle your debts right away. If you can’t settle all of your delinquent debts right away, the first thing you should consider is how many debts you can settle right away and if re-aging (bring current, pay off normally through payments – option only available on pre-charged off accounts) the remaining accounts will lower your monthly expenses enough to solve your problem.
The advantages to this approach are – you will gain control over your finances by lowering your monthly bills, you will resolve your delinquencies and begin to recover, and you will avoid the risks that are associated with settling your debts over a long period of time.
Feel free to contact me and I will dissect your finances to see if this is an available option for you.
If you can’t settle your debts right away…
If you lack the financial ability to settle enough debts right away, but prefer to settle your accounts, I HIGHLY recommend you take a do-it-yourself approach, due to the premature representation aspects of a long-term debt settlement plan.
However, please be aware, you really don’t want to attempt debt settlement if it’s projected to take longer than 24 months. Ideally you want to do it in 12 months or less.
There are 2 excellent companies out there that I completely trust that offer training and coaching services to assist you with your do-it-yourself needs.
If you can’t settle your debts in 12–24 months or prefer to avoid the adversarial aspects of settling your debts over time…
You are better off looking into a debt management plan. I recommend credit card consolidation with Cambridge Credit Counseling Services (if your accounts aren’t charged off – more than 6 months past due).
If they can’t create a sensible debt relief solution for your situation, you should seriously consider bankruptcy.
Should I file Chapter 7 Bankruptcy?
The advantage to filing Chapter 7 bankruptcy is that you will immediately lower your bills and solve your debt problem.
People who file Chapter 7 generally begin to reestablish new unsecured credit within 2 years of discharge.
Chapter 7 bankruptcies aren’t nearly as bad to recover from as most of my industry would lead you to believe. Please see my article about credit after bankruptcy to learn more.
If you decide on bankruptcy, Chapter 7 is definitely the one you want to file.
If you don’t qualify for a debt management plan and you can’t settle your debts within 24 months, you’re generally better off filing Chapter 7 bankruptcy. Please see my article on how to talk to debt collectors to help you compare filing bankruptcy versus doing nothing.
Should I file Chapter 13 Bankruptcy?
If you’re in a foreclosure situation it may save your home and it may make sense.
But, if you file for Chapter 13 bankruptcy, you will have to make payments to the bankruptcy trustee for 3-5 years.
Chapter 13 bankruptcies don’t have a great history of success because a lot of people who file for Chapter 13 don’t maintain those payments throughout the duration of the Chapter 13 plan. A high percentage of Chapter 13 bankruptcies fail.
Although, it may be possible to convert a failed Chapter 13 into a Chapter 7 bankruptcy.
If you have met with a bankruptcy attorney and you qualify for a Chapter 13, you may have some assets that you may be able to liquidate. If you do, you may want to learn more about my simultaneous debt settlement service.
Review the chart below to learn more about my debt settlement program so you may compare the two options against each other.
Chapter 13 Bankruptcy vs. Settling Debts Right Away
Compare Chapter 13 vs Settling Right Away
- Time to complete
- Time to recover
- Typical fee
- Typical success rate
- 3–5 years
- 5-7 Years
- MEDIUM RISK
- Fairly Low
Settling Right Away
- On average 72 days
- Approximately 2 years
- 10-15% of savings
If you would like to learn more about settling your debts, please see my 4-part series about how debt settlement works.
If you’re still asking yourself: “Should I file for bankruptcy?” and are not quite sure where you fit, please feel free to contact me and I’ll review your situation and point you in the right direction.