If you are thinking about filing Chapter 7 bankruptcy then chances are good that you are in financial trouble. When potential clients ask me whether I think they should file bankruptcy, I usually ask them what will happen if they don’t file. Can they pay off their debt in a reasonable amount of time? If so, what will it cost them to do so? Do they have disposable income that will allow them to pay off their debt while maintaining a reasonable standard of living for their family?
When the question of whether or not a person should file bankruptcy is considered with these additional questions, the right answer is usually obvious. If you can’t afford to pay off your debt in a reasonable amount of time, or doing so will be very expensive, or doing so will prevent you from providing a reasonable standard of living for your family, then you should consider filing bankruptcy.
I say the answer is obvious, but perhaps that isn’t fair. For a bankruptcy attorney who sees these types of situations daily, and is familiar with the benefits and negatives associated with filing bankruptcy, it seems obvious. But I have the benefit of experience with bankruptcy and seeing what happens when debtors delay filing. Debt can be overwhelming, and there is so much bad information about filing bankruptcy on the internet that I can understand why someone might be hesitant about filing for Chapter 7 relief.
The most common reason I hear for not filing is that filing bankruptcy will destroy their credit score. It is true that filing bankruptcy will hurt a person’s credit score, but that isn’t the whole story. To understand what this really means, you have to consider what a credit score is for. (Continued)