Should I File for Bankruptcy? Be Assured a Wisconsin Bankruptcy is Right for You
Contemplating divorce and wondering if bankruptcy is the right path? It’s important to acknowledge the negative stereotypes that often surround bankruptcy in the United States. People who seek bankruptcy protection are sometimes unfairly labeled as irresponsible, unethical, or lazy. However, the truth is that many Americans find themselves considering bankruptcy due to unexpected crises like job loss, medical emergencies, or divorce. Bankruptcy, a legal process, is intended to offer debtors a fresh start and relief from relentless creditors. But is it the right choice for you? In this guide, we’ll delve into the question of whether filing for bankruptcy is the best option, weigh the pros and cons, and explore alternative routes to financial stability.
Should I File for Bankruptcy?
If you find yourself drowning in debt that you can’t repay, or if you’re facing issues like an underwater mortgage, bankruptcy might be a wise decision. However, whether bankruptcy is right for you depends on various factors, including the type of debt you’re dealing with. It’s important to note that bankruptcy won’t discharge certain debts, such as child support, most back taxes, or debt resulting from legal obligations. Additionally, student loan debt is notoriously difficult to discharge, although recent discussions may bring changes for student loan borrowers.
Before making a decision, consider seeking help from a credit counselor who can evaluate your financial situation and provide guidance on whether bankruptcy is the best course of action. Furthermore, anyone filing for bankruptcy is required to receive credit counseling from a government-approved agency.
Consulting a bankruptcy attorney is also crucial. A lawyer can help you determine which of your debts can be addressed through bankruptcy and help you decide should you file for bankruptcy. In Chapter 7 bankruptcy (known as liquidation bankruptcy), you must demonstrate your eligibility through a means test, which assesses your debt, expenses, and income to determine if you genuinely can’t afford to repay what you owe.
Should I File for Bankruptcy? Pros of Filing for Bankruptcy
1. Relief from Creditors: One of the most significant advantages of bankruptcy is that it provides both temporary and permanent relief from creditors. An “automatic stay” prevents creditors from collecting money from you while the bankruptcy is pending and offers temporary protection from foreclosure, eviction, and car repossession. If a debt is discharged through bankruptcy, debt collectors are no longer allowed to collect on it.
2. Protection of Future Wages: Wages earned after your bankruptcy filing are not considered part of the bankruptcy estate, meaning your future earnings cannot be garnished to repay creditors for discharged debt. However, future wages may still be vulnerable to undischarged debt, like back child support or earnings committed in a payment plan for Chapter 13.
3. Emotional Relief: Managing multiple creditors can be exhausting, and financial stress can take a toll on your health and family life. Bankruptcy can provide much-needed breathing room and a clean slate.
4. Asset Protection: Bankruptcy may require you to sell some assets to pay off your debts. However, bankruptcy exemption laws protect essential assets like your home, car, clothing, and other valuables up to specific dollar amounts.
Should I File for Bankruptcy? Cons of Filing for Bankruptcy
1. Credit Damage: Bankruptcy significantly affects your credit score, which indicates your likelihood of repaying debt. A bankruptcy record can stay on your credit report for up to 10 years. However, you can start rebuilding your credit immediately, such as by applying for a secured credit card. While bankruptcy may harm your credit, if your credit is still in decent shape, there might be alternative solutions available.
2. Expenses: Filing fees for bankruptcy vary, ranging from $313 for Chapter 13 to $338 for Chapter 7. Attorney fees also vary but can start at $1,300 for Chapter 7 bankruptcy and $3,000 for Chapter 13.
3. Asset Liquidation: In Chapter 7 bankruptcy, assets that do not qualify for exemption may need to be sold to pay off your debts. In Chapter 13 bankruptcy, you can keep your belongings, but the value of nonexempt luxury assets is used to negotiate a repayment plan with creditors.
4. Limited Borrowing Capacity: Having a bankruptcy on your credit report makes lenders hesitant to extend credit. You may be unable to obtain a loan until the judge discharges your debt, which typically requires waiting two to four years after a Chapter 7 discharge before applying for a mortgage.
Should I File for Bankruptcy? Alternatives To Filing for Bankruptcy
1. Sell Assets
Before any nonexempt asset is liquidated as part of a Chapter 7 bankruptcy, consider selling it on your own. You might get a better price and use the extra funds to pay down debt.
2. Negotiate With Creditors
Surprisingly, you can contact your creditors directly, especially if it’s early in the process or before you become significantly delinquent. Later, you could negotiate directly with collection agencies. Explain your circumstances and try to reach an agreement,
Conclusion Seek Professional Guidance to Determine: Should I File for Bankruptcy?
Determining whether to file for bankruptcy or explore alternative debt relief options is a critical decision that should not be taken lightly. While bankruptcy can provide much-needed relief from overwhelming debt, it’s essential to weigh its pros and cons carefully. Consulting with professionals who specialize in bankruptcy law is highly recommended to make an informed choice tailored to your unique circumstances.
At Dahlberg Law Group, we understand that financial difficulties can be challenging and stressful. Our experienced bankruptcy attorneys, including Attorney Steve Eichsteadt, are here to provide you with expert guidance and support throughout the process. Whether you’re considering Chapter 7 or Chapter 13 bankruptcy or exploring alternative solutions, our team can help you navigate the complexities of your financial situation.
Remember that you don’t have to face your financial challenges alone. Reach out to us for a consultation to discuss your options and determine the best path forward. We are committed to helping you achieve a fresh financial start and regain control of your life.
Don’t let debt overwhelm you. Contact Dahlberg Law Group today and take the first step toward a brighter financial future. Your journey to financial stability begins with a conversation.
For additional information on bankruptcy in Wisconsin, step-by-step guidance, and forms, please refer to the Wisconsin Western District Bankruptcy Court FAQs and forms download.
