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If you’re confronting a large amount of debt, bankruptcy may be an option you’re considering. The question of whether that’s necessary to resolve your situation is complex, and can be answered by a bankruptcy lawyer. They can advise you about options, even if they don’t include bankruptcy. Here are some factors that may influence your decision.
Are Your Debts Dischargeable in Bankruptcy?
Unfortunately, bankruptcy does not wipe the slate on all forms of debt. For example, student loans are difficult to have discharged. You must prove “undue hardship” in additional proceedings after you file. There are additional tests you will have to meet to prove this.
Tax liens, child support, alimony, and certain other forms of debt are also not dischargeable in bankruptcy, ordinarily. Before assuming bankruptcy will provide significant relief, you should talk to a bankruptcy lawyer.
Is Your Income Inadequate to Repay Your Debts?
Your debts may seem insurmountable, but sometimes appearances are deceiving. A serious look at your income relative to your debts, along with possible cost reductions in your monthly expenses, might turn the tide. It’s worth looking at this in advance of filing, because the courts will. If they find that your income is adequate, you’ll have problems.
Can Your Debts Be Renegotiated Without Filing Bankruptcy?
Another alternative you can discuss with your bankruptcy lawyer is negotiating your debts. Your lawyer can work with your creditors to avoid bankruptcy for you, because bankruptcy may result in their debts not being collectible. These negotiations sometime involves lowering interest rates, minimum payments, or accepting lump sums that are some percentage of the original amount owed. While these types of settlements can damage your credit, so does bankruptcy.
You should be cautious when looking at debt negotiation or settlement agencies that are not law firms. There are many companies that promise to make progress of some kind, consolidate debts, or otherwise make your debts go away. While these companies may be acting in good faith, they may leave you vulnerable to continued collection action, and you may be even be sued to collect your debts.
Are Your Assets in Danger?
The major thing to consider when contemplating bankruptcy is whether bankruptcy will protect assets. If you don’t have assets that will be protected in bankruptcy, the situation may need further evaluation.
Bankruptcy is a difficult action to consider, given its impact on your credit score. Sometimes people put off looking at bankruptcy because it seems complicated and uncertain. It’s best to talk to a lawyer so that you know your options.