Thinking About Filing for Bankruptcy: The People Who Could File - Westgate Law

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Thinking About Filing for Bankruptcy: The People Who Could File

There are three types of bankruptcy: Chapter 7, Chapter 11 and Chapter 13. If one doesn’t suit the situation, another is probably a good option. Many individuals and businesses interested in filing contact an expert in bankruptcy requesting a black and white answer to the common question, “Should I file or not?”

The difficulty with black and white answers is that so many questions have multiple answers. You probably won’t be surprised that this question definitely doesn’t have black and white answers. In some situations, the answer is obvious. One person may definition benefit from filing bankruptcy. The next person might definitely NOT benefit. Then there are the many who COULD benefit from filing for bankruptcy.

The person who could file for bankruptcy protection, but doesn’t actually HAVE to:

Sadie is a medical student. She has accumulated $20,000 in credit card debt. She also has over $100,000 in school loans. She’ll be graduating in 2 months at which point she’ll have to start making payments on her student loans. Sadie is a lucky one and she has already landed a job at a thriving family practice. She’ll be making $160,000 per year. But she’s still worried about her ability to get out of debt. She is wondering if filing for Chapter 7 bankruptcy might be a good idea because she probably won’t be eligible once she starts her new job.

Sadie’s situation is tricky because as long as she doesn’t have an offer letter in hand with a start date for her new job, filing is an option and it would provide some benefits. She would gain relief from some of her credit card debt. On the other hand, Sadie’s student loans cannot be discharged. Regardless of what happens with her credit cards, she’ll still be stuck paying on the majority of her debt. The court will also likely frown upon her filing and decline to provide her with the desired discharge because she will soon have a good, regular income. Sadie could file bankruptcy and potentially receive a discharge of the smaller portion of her debt (but the portion with the higher interest rate in all likelihood).

OR it might be an even better idea for her to attempt to negotiate with her credit card companies to reduce her monthly payments temporarily until she starts her new job. This would most likely result in a short period of bad credit, but her credit would improve again once she started her new job and started making regular payments to bring down her balances.

If you need additional assistance determining whether or not bankruptcy is the right answer for your situation, contact the experts in southern California bankruptcy law at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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