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10 Things to Consider Before Filing Bankruptcy

January 3, 2015 John J. Scura III Bankruptcy

Filing-bankruptcyWhile the following is not a complete list of all issues when deciding whether to file bankruptcy, these are frequent considerations and questions that arise with clients contemplating bankruptcy. 

  1. Do I have assets that will be liquidated or sold if I file bankruptcy?

You have to analyze initially if your assets will be liquidated if you file bankruptcy.   You are entitled to exemptions under the Bankruptcy Code so many things will not be sold if you file bankruptcy.   If, however, you have assets such as a house without a mortgage and you will lose it if you file bankruptcy, some other options should be considered. 

  1. Do I have enough debt to file bankruptcy?

If you do not have that much debt, you may decide that filing a bankruptcy is not worth it.  There is no minimum amount of debt you must have to file so in theory you could owe only a dollar and file bankruptcy.  If, however, you only have minimal debt, it may be better to settle that debt in order to avoid the bankruptcy altogether.   It is really dependent on your individual situation.   

  1. How much will the bankruptcy truly impact my credit?

Most people who come to our firm with financial problems already have damaged credit.  The filing of the bankruptcy will really not make it that much worse.  In fact, many times clients are able to get back on their feet quicker after filing bankruptcy and are in a position to re-establish their credit quicker by filing a bankruptcy.   A bankruptcy does hurt your credit scores but sometimes the damage is already done so it does not make much of a difference.

  1. Can I discharge tax debt if I file bankruptcy?

Contrary to popular belief, you can discharge certain tax debt.  There are five rules to determine if you can file a bankruptcy and wipe out tax debt.  Wiping out substantial tax debt may be a great reason to file a bankruptcy. 

  1. Can I discharge student loans if I file bankruptcy?

Most student loans cannot be discharged.  You may, however, qualify for the hardship exception to the rule that student loan debts cannot be wiped out.  The proofs necessary to satisfy this exception are difficult, but it may be possible depending on your situation. 

  1. Is my income too high to file bankruptcy?

If you make too much money, you may be unable to file a Chapter 7 bankruptcy.  You may have to file a Chapter 13 bankruptcy if your income is over the median income level for your area and you cannot qualify for a Chapter 7 after going through the means test.

  1. Will I lose my house or car if I file bankruptcy?

Depending on what your house or car is worth and the loans against those assets will determine whether you can keep your house or car and file bankruptcy.  Most individuals we represent are able to keep these assets and still file bankruptcy. 

  1. Is the timing right or should I wait to file the bankruptcy?

You may want to wait to file a bankruptcy depending on your income situation and whether you have a significant event that will result in increased debt, such as a medical procedure and you have no insurance.   You may also want to a file a bankruptcy quicker in order to stop a sheriff sale or other creditor action against assets you want to protect.

  1. Can I settle the debt I owe without filing bankruptcy?

You can settle outstanding debt if you have the money to settle that debt.  Typically creditors will take less than is owed by way of settlement.  What you also have to be careful of is that you may be taxed on the portion of the debt that is forgiven in the settlement.  You do not want to settle a debt and then have a significant bill to the IRS for the amount of money on the debt that was forgiven. 

  1. Can I protect retirement assets if I file bankruptcy?

Most retirement accounts, such as 401ks, pension plans, IRAs and 403bs are exempt in a bankruptcy.  Thus, you can file a bankruptcy and these qualified retirement monies cannot be touched. 

Give a lawyer in one of our New Jersey offices a call to determine whether your retirement assets are exempt or schedule your free bankruptcy consultation online.


John J. Scura III

John fights hard for his clients and tries to educate them so they understand what is going on with their particular legal problem. John has been Certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or other type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.

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