Many people ask me, “Do I qualify for bankruptcy?” Actually a better question is, “Will bankruptcy fix the financial problem I face?” Usually the person asking that problem can benefit from a bankruptcy fresh start. . . but not always. Nearly every month have to tell one or two potential clients that bankruptcy is not the best course of action for them. Here are some questions to ask in analyzing whether to file or when to file bankruptcy:
Do you have non-exempt assets that you could lose or have to buy back from the bankruptcy estate? Each state sets its own exemptions, which typically protect the property you need to live and make a living. You can exempt certain assets, usually up to a certain dollar amount, that are not at risk and you keep. These may include retirement accounts, household goods, homestead, cars, tools of a trade, jewelry, and clothing. With your attorney’s help you can determine whether the value of your assets exceed the amount you can claim as exempt and if the amount of any non-exempt assets makes bankruptcy a good or bad choice. Maybe in your situation avoiding bankruptcy or repayment over a few years in a chapter 13 makes more sense than chapter 7.
Have you engaged in transactions that suggest that you should not file or wait before you file? These include transfer of money or other assets to friends or family members, recent use of a credit card, transfer of a credit card balance to another credit card, receiving a bankruptcy discharge in the past 8 years, or recent purchase of a new or used vehicle. There are other transactions that can impact your bankruptcy, so it is critical to accurately and completely disclosure all relevant information to your bankruptcy attorney so your bankruptcy can proceed as smoothly as possible.
You should consult a bankruptcy attorney when you realize that your debt is overwhelming your income to help you recognize the risks and benefits of filing a bankruptcy in your specific circumstances. Your attorney can help you navigate the process well before your bankruptcy is filed.