When declaring bankruptcy is a bad idea.
There are times when the negatives simply outweigh the positives of filing for bankruptcy, and no matter how dire your debt may appear, bankruptcy will only exacerbate the problem. Consider some of these reasons why bankruptcy may not be your best option:
You have debts that aren’t eligible for discharge. Discharged is what its called when your debt is wiped out. If the debt wont go away then bankruptcy might be worth it. You may have some debts types of debt that a Chapter 7 bankruptcy proceeding will discharge, but if you have too many ineligible debts, it may not be worth the trouble or cost of filing. (The average bankruptcy attorney’s fee is $1000 to $2000.) So while you may have some medical debt in collection, bankruptcy won’t do anything for your student loans, back taxes, or alimony or child support costs if your debt was the result of a divorce.
You can’t handle the potential consequences. A bankruptcy can remain on your credit report for 10 years, and following a bankruptcy proceeding, your credit score could see a drop of 100 to 250 points depending on the amount of debt and type of bankruptcy filing. If future lenders run a credit check on you, your chances of being approved for a mortgage loan, a new credit card, renting an apartment, or even obtaining an insurance policy at a reasonable rate may be slim to none. Worse still, can you handle losing your assets and belongings? You’ll need to start from scratch to replace them, which will cost time and money.
You haven’t looked at the big picture. With bankruptcy, be careful what you wish for; you might just get it. You may qualify for a Chapter 7 or 13 filing, but do you really need it? Your financial situation may not be as bad as you think. Have you examined all your alternatives to pay off your debt? If you’ve lost a job, will you receive unemployment benefits, or can you look for side work to raise cash? Can you rework your budget to find a place for your debt? Can you negotiate a payment plan with your creditors without the court’s involvement? Seeking bankruptcy may end up being a permanent outcome to a temporary problem. Work with an experienced bankruptcy lawyer to find out what is right in your situation.
Make your decision carefully. Bankruptcy is a major decision an experienced Utah bankruptcy lawyer will tell you if bankruptcy is not right for you. In my practice about 20% of the people that walk into my office I tell them the bankruptcy is not for them.