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How do I know if bankruptcy is the right choice for me?

| Apr 17, 2020 | Firm News

Those who have recently found themselves in financial struggles may wonder whether they should ride out the storm or immediately file for bankruptcy. If you have recently become unemployed, filing for bankruptcy immediately may feel like a rash decision. However, waiting too long before taking action to file could mean that you will be dealing with much more debt and complex scenarios.

If you are worried about your financial future because of a job loss or quickly rising debts, you should try to analyze your situation and reflect on whether bankruptcy is, in fact, a good decision for you. The following are some of the things that you should consider when deciding whether to file for bankruptcy.

What is your biggest financial concern?

It may be that your biggest financial concern is medical bills, immediate cash flow issues, or foreclosure proceedings. If you are struggling with only one financial concern, there will likely be other alternatives for dealing with it. However, if you are struggling with several financial issues, for example, foreclosure proceedings in addition to unemployment and significant debts, bankruptcy is probably the best way for you to get a fresh start.

Figure out which bankruptcy option you would be eligible for

Private individuals generally have the choice between two bankruptcy Chapters: Chapter 7 bankruptcy and Chapter 13 bankruptcy. But to file for either, they need to show that they are eligible.

Chapter 7 bankruptcy tends to be the preferred option, especially among those with a low amount of assets. This is because Chapter 7 bankruptcy involves a very quick process of asset liquidation to pay off debts. If assets are not enough to pay off all debts, the bankruptcy filers will likely benefit from a debt discharge. However, to be eligible for Chapter 7 bankruptcy, you should be able to show that you have a low income and would otherwise be unable to pay off your debts.

Chapter 13 bankruptcy is better suited to those with a stable income because it involves debt restructuring so that debts can be paid off over time.

If you are going through financial struggles and you are wondering about your options to file for bankruptcy, you should gain an understanding of how bankruptcy works in North Carolina.

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