Three Reasons Not to File Bankruptcy - Parry Tyndall White
We handle difficult cases in North Carolina's state and federal court; complex civil litigation, serious criminal matters and individual and business bankruptcies.
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Three Reasons Not to File Bankruptcy

Three Reasons Not to File Bankruptcy

Bankruptcy

Bankruptcy (Photo credit: LendingMemo)

Filing for personal bankruptcy is a difficult decision to make, but it’s not something that’s right for everyone. Some people who want to file for bankruptcy want to do so for the wrong reasons. Bankruptcy is a powerful legal tool that can help you if you’re struggling, but it’s something you should only do for the right reasons. Filing for bankruptcy for the wrong reasons is never a good idea.

Wrong Reason 1. You’re paying your bills but you want to be more financially secure.

Bankruptcy is a valuable tool, and away out for many consumers who are falling behind on their credit card payments, are worried about foreclosure, or who have lost their jobs. Bankruptcy gives you a chance to level the playing field against your creditors, and gives you the chance to free yourself from the constant financial pressures you’re under.

But bankruptcy is also drastic. It will have a long-lasting effect on your life and your ability to get a loan. Your life won’t be ruined, but you will have to learn to live with fewer options, at least for a while.

That’s why you usually shouldn’t file for bankruptcy if you’re still able to pay your bills. Bankruptcy is for people who are struggling. If you’re able to make credit card payments, are up-to-date on your mortgage, and are still able to keep food on your table, you probably don’t need bankruptcy.

Wrong Reason 2. You’re overwhelmed by student loans and need help.

Student loan debt recently topped $1 trillion. That’s more than the amount of money Americans owe for car loans and credit cards.

Student loan debt can follow you for years, even decades. It can make the idea of owning a home little more than a dream, and make the idea of financial security something closer to a myth than a reality. Student loans are a burden for millions, so it’s no surprise that so many people look to bankruptcy as a way out.

But bankruptcy is no cure for student loan ills. In some situations it is possible to discharge your student debts by filing for bankruptcy, but this is incredibly hard to do. (Your bankruptcy lawyer can tell you more about it.)

The fact is, bankruptcy laws are stacked heavily in favor of student loan providers. If you’re a reasonably healthy person who has a job, or who might be able to find a job in the foreseeable future, your student loan debts will likely not be something you can get rid of through bankruptcy. No matter how big your loans are, the chances of you being able to discharge the loans through bankruptcy are fairly low.

Wrong Reason 3. You want to buy a house, car, or make another large purchase.

Sometimes, people want to file for bankruptcy simply to eliminate their bills. Maybe they have a handful of credit cards they’ve maxed-out. Maybe they have made several late payments and don’t want to have to worry about the bills anymore.

If they eliminate their debts, they’ll have more money to buy things. They’ll be able to get that house or car because they can afford the payments. Right?

Wrong. Bankruptcy isn’t a “Get Our of Jail Free” card. It’s not just a way to eliminate your debts so you can go out and acquire more.

First of all, filing for bankruptcy will lower your credit score; guaranteed. Depending on what your score currently is, bankruptcy might lower it a lot or a little. Regardless of the actual decrease, you can forget about getting a mortgage or other large loan within the first six months to a year or longer after your bankruptcy is finally discharged. Though bankruptcy can actually help you improve your score in the long run, you can’t use it as a way to go out and acquire new debt

Second, there are limits on who can file for bankruptcy. If you have enough to pay your bills and are making an income, the chances are that you won’t be able to qualify anyway.

Advice and Guidance

Deciding whether bankruptcy is right for you, and what type of bankruptcy is appropriate to your situation, is not an easy calculation to make without assistance. You never want to make any decision about bankruptcy before you’ve talked to an experienced bankruptcy attorney. The attorneys and staff at the law Offices of James C. White have helped hundreds of clients manage financial hardships, guiding many of them through the bankruptcy process from start to finish. If you’re worried about your ability to pay your bills or are wondering if bankruptcy is right for you, call us today.

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Jim White
Jim White
jwhite@ptwfirm.com

Jim White helps people and companies facing serious financial injury. He has successfully taken on banks, large financial institutions and other corporations in “David v. Goliath” cases.