Before a bankruptcy case can be filed, the debtor must decide whether bankruptcy is, in fact, the best vehicle for dealing with the problems that the debtor faces. In a typical consumer bankruptcy case, most of the attorney's analysis involves comparing bankruptcy with other possible avenues of handling financial problems.
A necessary prerequisite to such comparison is a knowledge of all the relevant facts. Although it may sometimes be possible to rule out bankruptcy based on knowledge of only a few facts (for example, that a debtor does not wish to lose certain property that cannot be saved in bankruptcy), it is never possible to decide safely to pursue bankruptcy without a thorough knowledge of the facts. Without such knowledge, unknown property (such as the right to a tax refund) may be lost in bankruptcy; major debts may turn out to be unaffected because they cannot be discharged or because there are liens on property; or property might be incorrectly valued and, as a result, lost to creditors.
To assess whether bankruptcy will help, take the following steps:
- Learn the advantages and disadvantages of bankruptcy. It is important to know the benefits and pitfalls of bankruptcy. While the benefits can be great--discharge of most debts and an automatic stay against creditors--there are disadvantages, particularly the possibility of losing property.
- Determine whether bankruptcy will get rid of your debts. Bankruptcy doesn't eliminate all debts. If you have many secured debts or debts that cannot be discharged in bankruptcy, bankruptcy may not be the best option for you. Debts that cannot be discharged include taxes, alimony and child support and student loans.
- Do a budget analysis. Doing a budget analysis can help you determine whether you will be able to pay your bills after a bankruptcy proceeding. You need to calculate ongoing expenses and income to determine whether a bankruptcy proceeding will solve your debt problem or if the problem will continue.
- Consider alternatives to bankruptcy. Bankruptcy is only one way to deal with overwhelming debt. There are other steps you can take to reduce your debt that don't involve filing for bankruptcy.
The easiest way to determine if bankruptcy is the best avenue for any potential client is for us to sit down and discuss your personal situation. If you have any of the concerns mentioned before please consider setting an appointment today.