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When is Filing for Bankruptcy Not a Good Idea?

Posted on in Bankruptcy Attorney
When is Filing for Bankruptcy Not a Good Idea?

When you are unable to handle your debt load, whether that debt load is personal or business debt, you might consider filing for bankruptcy. Bankruptcy is a legal process through which an individual or company in debt can have that debt discharged, either through the liquidation of assets (Chapter 7), a repayment plan (Chapter 13), or a reorganization of the company (Chapter 11). Other chapters exist as well, such as Chapter 9, Chapter 12, and Chapter 15, but these are for niche purposes and only utilized by specific groups.

Although bankruptcy is an option for regaining control of your debt, it might not be your only option. Even if it is one of many options available to you, it might not be your best option.

You Have Debts You Cannot Discharge

Certain debts cannot be discharged. The most prominent example of this is student debt, which actually can be discharged in certain circumstances. But for most people, it cannot be discharged. Neither can debt from compiled spousal or child support. If you are facing and of these types of debt, speak with a bankruptcy attorney about your options for reducing your debt obligation that do not involve bankruptcy. You may be able to work out another solution with the court or the party to whom you owe the money.

You Cannot Afford the Hit to Your Credit

Bankruptcy has a negative impact on your credit score. It is also included on your credit report for up to 10 years. If you plan to purchase a home, attend college, or cosign a loved one's loan in the coming years, having a bankruptcy on your credit report can affect your ability to do so successfully and with a favorable interest rate.

Your Income is Not Consistent

If you plan to file for Chapter 13 bankruptcy, you will have a difficult time getting your repayment plan approved if you do not have a consistent income. If you work on commission or as a freelancer, you might want to explore other options like debt settlement over bankruptcy.

You Recently Transferred Assets

If you recently transferred a significant asset like a car or a home, it can be difficult or impossible for you to file for bankruptcy. If this type of transfer occurred without a monetary exchange within the two years leading up to your bankruptcy filing, it could be deemed a fraudulent transfer and overturned by the court.

Work with an Experienced Woodstock Bankruptcy Attorney

Filing for bankruptcy is not something to take lightly. In fact, it should only be done after you have carefully considered all of your options with the guidance of an experienced bankruptcy attorney. Depending on your circumstances, you could have alternate options that can serve you better than bankruptcy could. To learn more, schedule your initial legal consultation with a member of our team at Newland & Newland, LLP. We serve clients in the North Chicago, Fox Lake, Zion, Winthrop Harbor, Waukegan areas from out our office located in the prestigious 180 North LaSalle street building in Chicago.

(image courtesy of Dodgerton Skillhause)

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