When is declaring bankruptcy the best option?

My husband and I have accumulated a fair amount of debt over time. In the past, we have been able to make various payments on the debt, but now my husband recently lost his job, and we are struggling to keep afloat. Should we consider bankruptcy?

Whether to file for bankruptcy is not an easy decision by any means.

The idea of seeking bankruptcy often gives many people great anxiety.

However, sometimes everyday circumstances — such as the loss of a job — occur that make bankruptcy an appealing or even the best option.

Many considerations go into whether one should file for bankruptcy.

Before filing, one should always try to work with creditors to see if problems can be resolved.

If negotiations fail and bankruptcy appears to be the best option, an experienced lawyer can help you with this process.

The two common types of bankruptcies often sought by private individuals and families are Chapter 7 and Chapter 13 bankruptcies.

Chapter 7 bankruptcies allow one to extinguish a variety of debts.

To qualify for a Chapter 7 bankruptcy, one must satisfy the “means test.”

The means test ensures the individual seeking bankruptcy has a low enough income to qualify.

This test works to ensure high-wage earners do not use bankruptcy as a means to eliminate debts they could potentially pay.

An attorney helping you consider whether Chapter 7 is right for you likely will next consider the extent to which your debts are dischargeable.

For instance, one cannot eliminate debts, such as student loans and child support obligations, through a Chapter 7 bankruptcy.

A Chapter 13 bankruptcy is different in many ways from a Chapter 7 bankruptcy.

Although a Chapter 7 bankruptcy allows for keeping a significant amount of property — including the house, a car and various personal items — a Chapter 13 bankruptcy is geared toward allowing you to keep all your property as long as you make the proper payments.

A Chapter 13 bankruptcy provides for an immediate stay against creditor actions.

A repayment plan is developed that dictates how one will pay off debts, over usually a three- to five-year period.

With Chapter 13 relief, debts, such as student loans and taxes that are non-dischargeable in Chapter 7, may be adjusted.

Thus, a careful classification of debts helps to further reveal if a Chapter 13 is advantageous over a Chapter 7 even if one satisfies the Chapter 7 means test.

If you have a family business and are considering using some type of business bankruptcy approach, other options should be examined.

A qualified attorney can help ensure assets are protected and the proper procedures are followed to avoid dismissal.

Additionally, a qualified attorney will be able to answer a variety of questions including how a bankruptcy may impact your credit or how often one may file for bankruptcy.