Should I File Bankruptcy

To file, or not?  Here’s how to tell.  

You are not here reading this by accident.

Or for fun.

Or because you had nothing else to do.

You are here because you have a serious debt problem.

Like the old saying goes…

If you think you have a problem,

Then you probably do.

You have looked into other options.

Perhaps you’ve tried other options.

Not working.

Or else you would not be here.

In a brief two minute read, I’ll share the essence of my 40 years of helping my clients to:

• Wipe out debt
• Keep their property
• And improve their credit.

But first, consider this.

• If you are facing more than 10,000 in debt, or
• Living on credit cards for basic necessities
• Making only minimum payment on debt
• Worried about collections, calls, repossession, lawsuits, etc
• Your debt is affecting your health and/or your relationships
• If you answered yes to any of these, you have come to the right place.

I’ll tell you how I do it, in just a few minutes of your time.  Then it’s up to you.

Every case is different and it really depends on the individual, but as a certified credit counselor, I always start with a cash flow review.

How much does your household bring in, net, per month?

All sources of income count, including overtime, bonus income, commissions, etc.  And you do need to include regularly received income from a non-filing spouse or significant other.

Subtract your housing cost and your car payments, and any other secured debt payments or taxes.

Next, subtract an amount to cover your living expenses (without putting anything on credit cards or other borrowed funds).

You can use $3,100 per month for a family size of one, and add an additional $200 per month for each additional person in the household.  This is a good general guideline for bankruptcy budget calculations in Ohio.  It’s not exact but you will be close.  This works for chapter 7 bankruptcy and chapter 13 bankruptcy.  

Now, you  have probably read about the means test in bankruptcy.  You might even know that the means test is different for chapter 7 and chapter 13 bankruptcy cases.  But put that aside for now. 

The purpose of this exercise is to see how much you have each month to pay down your debts.  So after you have determined your net monthly income, and subtracted the housing cost (rent or mortgage), and the mandatory payments for your cars and other secured debts, and tax debt if you owe any, and the family living expense budget based on the guidelines noted above, you will see how much is left for debt payment.

Often, at this point, it is clear to determine which solution, chapter 7, chapter 13 or some kind of non-bankruptcy work out might be effective for you.

Key Considerations:

Chapter 7 will wipe out without any  payment most unsecured debts like credit cards and medical bills, personal loans and similar debts.

Chapter 13 is a very powerful but often misunderstood (even by some bankruptcy attorneys) tools that can help you keep your property safe from repossession and foreclosure and protect assets which might be lost if you filed a chapter 7.  You may only pay back “pennies on the dollar” in these chapter 13 bankruptcy cases.

Bankruptcy effect on your credit is an important, but secondary consideration.

As a certified credit counselor, I can help you rapidly recovery credit in both chapter 7 and chapter 13 bankruptcy.  The fact that a bankruptcy may be reported on your credit report for 7 to 10 years is TOTALLY IRRELEVANT to your ability to recover a good credit score. 

Don’t get obsessed with the Means Test

Bankruptcy attorneys often want to start with means test.  If your gross monthly income is over the median for your family size they will tell you that you have to file a chapter 13 bankruptcy.

This is not always true.

Bankruptcy attorneys will often recommend chapter 7 bankruptcy if your income is lower than the median income for your family size.

But this is not always the best approach.

Just because you are under median income does not mean that chapter 7 bankruptcy is best for you. Similarly, if you are over median you might still qualify for chapter 7 bankruptcy but even if not, you might actually pay less in a chapter 13 bankruptcy compared to a chapter 7, due to the “cram down” possible in chapter 13, and the fact that often you pay a lower interest rate on secured debt in chapter 13 bankruptcy compared to chapter 7 bankruptcy.

It’s just not as simple as plugging your income and family size into a computer that spits out the right answer. And, even two families the same size with the same gross income may be better off in different bankruptcy chapters.  Every case is different.

Assuming you have enough money left over to make satisfactory progress on your debt, you might still be better off using a bankruptcy to wipe out the debt.

And, depending on what kind of collection efforts are being used against you, lawsuits, garnishment, repossession or foreclosure, you may be forced to file either chapter 7 or chapter 13 bankruptcy.

Bankruptcy is not a “Last Resort”

Many people are biased against thinking of bankruptcy as an option.

I understand that.

We often hear, and believe (without questioning it) that “bankruptcy is the last option anyone should consider.”

This is nonsense.  Who made this up?  Not someone with overwhelming debt, for sure.

If you cannot honestly say that you can be debt free in 3 to 5 years with nothing more than your disposable income to pay the debt, which these days goes mostly to interest on your debt and does not actually pay the debt down, then you are foolish not to consider bankruptcy as an option.  And it should not be the last option you consider.  

Debt Management alternative to filing bankruptcy

I see too many people in my practice who have wasted years of their lives and thousands of dollars in failed debt management plans, and come to me only after they end up being sued.

Sadly, when I analyze their financial situation, I see that they never should have been in these programs in the first place.  They should have been given a referral to a bankruptcy attorney.

But, of course, that never happens, because the debt management people would not make any money if they did the right thing in the first place.

People let pride stand in the way of financial recovery

You owe it to yourself and your family to make the right choice for your future no matter what that may  be, or what anyone else may think or say.  

The truth is that pride keeps most people from considering filing bankruptcy when it is the obvious best solution to their debt disasters.

And, today, inflation is causing more and more people to fall behind.  All of us are but one or two missed paychecks, an expensive car repair, or an unexpected medical issue, that can start a chain reaction of mounting debt, borrowing to pay for living expenses and pretending that we “will get caught up next month.” 

Waiting to file Bankruptcy just makes your problem worse

Don’t let your situation get any worse than it is, wondering if filing a chapter 7 bankruptcy or a chapter 13 bankruptcy might be right for you.  Contact a bankruptcy attorney for a review of your options.  We provide a comprehensive analysis, including credit recovery, and file bankruptcy cases in Dayton,Columbus and all other courts in Ohio.

The consultation is free, done by zoom or on the phone, and there are no longer any court appearances needed, because the bankruptcy court has now switched over to zoom meetings.

We no longer have to travel to the court, and you no longer have to travel to my offices to get the help you need.

Get a free consultation, find out if you should file for bankruptcy or not (Ohio residents only)

Waiting just makes it worse.  Once you have done the math that I’ve outlined above to find out what your starting point is, then you can decide if you need to take the next step and contact us for for a free consultation.  

If you don’t need bankruptcy, we will be the first to tell you.  But if you do, we’ll help you weigh the pros and cons for filing chapter 7 bankruptcy or chapter 13 bankruptcy, whether you live in Dayton, Columbus or anywhere else in Ohio. 

Richard West Law Office, serving Ohio since 1986 

Richard West has 40 years of experience filing chapter 7 and chapter 13 bankruptcy petitions in all Ohio bankruptcy courts.  He is also a certified credit counselor and a 20 year board certified consumer bankruptcy attorney.