When to file bankruptcy

When to file bankruptcy.  Many people listen to financial people who recommend when to file bankruptcy only as a last resort. The problem with this is that many people do everything they can to avoid bankruptcy (including selling valuable assets that would otherwise be protected), only to end up bankrupt anyway.

Take for instance a friend of mine named Joe. Joe was told by his family and friends that bankruptcy was the worst option possible. That filing chapter 7 would scar his reputation and credit report for years to come. John knew that bankruptcy shouldn’t be taken lightly, and he was very prudent to study his options carefully before making a decision when to file bankruptcy.

However, even though he felt that he needed to file Chapter 7, he was too ashamed and too timid to go against his family’s advice and decided to go with some other options instead. He obtained a home equity loan to pay off some of his credit card bills. When that wasn’t enough to cover all of his debt obligations, he decided to take money from his retirement.

The sad news is that this was not enough to pay all of Joe’s financial obligations including credit card bills, medical bills, and other debts. When all was said and done, he was still bankrupt and now had no retirement funds and he sold a lot of his assets. He had also lost a significant portion of equity in his house, and his house was on the line if he cannot pay back the bank loan because he could not decide when to file bankruptcy.

Although this might seem like an extreme scenario, the point is that bankruptcy should not be viewed only as a last resort.  It can save some valuable assets from creditors. Your home is often protected by a homestead exemption clause in Massachusetts.  Pension plans and retirement funds are usually also protected. If you would have to put at risk your valuable assets that would otherwise be exempt from liquidation, then you need to consider Chapter 7 very carefully.

Likewise, you need to ask yourself how long it would take to pay off your current bills. What kind of lifestyle you would have. If you can live a reasonable standard of living while paying off your debt in the next few years, you should at least sit down with a bankruptcy attorney and discuss your options.  Call us today for a free consultation or visit our web site www.massbklaw.com

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