When will I know it’s time to file for bankruptcy?

On Behalf of | May 9, 2023 | Bankruptcy

Bankruptcy is often the smartest option for New Jersey residents struggling with overwhelming debt, but you might not be sure if it is right for you.

You may assume that since almost everyone has financial troubles at some point that your situation is not bad enough to justify filing for bankruptcy. But when things start to feel out of control and you cannot figure a way out of your debt situation, it might be time to file.

Contact your creditors first

Whether you should file depends on your situation. If you are unsure, it could help to contact your creditors first and see if they can work out payment arrangements with you. You could also talk with a credit counselor to see if there are any other steps you can take besides bankruptcy.

While there is no set rule that determines when you should file, if you cannot obtain a debt repayment plan with your creditors that works for you, and you simply do not have enough money to pay your debts, bankruptcy might be your best option.

Before you file, decide what type of bankruptcy is best for you. Most personal bankruptcies are Chapter 7 or Chapter 13 bankruptcies.

Chapter 7 vs. Chapter 13

Chapter 7 bankruptcy eliminates all of your qualifying debt. Some debt cannot be discharged in bankruptcy, such as child support.

Rather than discharging all of your debt, a Chapter 13 bankruptcy sets you up on a payment plan that typically lasts three to five years. Creditors who did not want to negotiate a payment plan with you can still be part of your Chapter 13 bankruptcy repayment plan.

A Chapter 13 bankruptcy is a good idea if you have enough income and assets to make the payments according to the payment plan. When you do know you will not be able to make the payments no matter what, Chapter 7 is probably a better choice.

Bankruptcy is a major step that can affect your credit and finances for years to come. Getting professional advice to know if it is the right choice is recommended.

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