MOST OF YOUR DEBTS ARE NON-DISCHARGEABLE, SO BANKRUPTCY DOES NOT HELP YOU.
Bankruptcy is a great tool to eliminate debt, and it can wipe out most debts, but there are certain debts that your bankruptcy cannot eliminate. If a large portion of your debts is not going to be discharged in bankruptcy, then you should strongly consider whether filing bankruptcy makes sense.
For instance, suppose you want to file Chapter 7 to get rid of some credit card debt but you also owe a lot of student loan debt. In this situation, filing for Chapter 7 bankruptcy will likely not do a lot for you. Sure, you got rid of some credit card debt, but your student loans will most likely not be discharged in your bankruptcy. The same is true with most taxes, child support and alimony, and other nondischargeable debts.
What does this all mean? You get rid of some debt, you still owe on the nondischargeable debts, and you need a smart repayment plan to address those debts. You would have to do that even if you do not file bankruptcy, so what do you really gain by filing?
YOU HAVE THE FINANCIAL MEANS TO GET OUT OF DEBT YOURSELF, AND BANKRUPTCY DOES NOTHING SPECIAL FOR YOU.
Your situation may not be as dire as you think. You may be able to pay them off yourself without filing for bankruptcy.
Your income and your expenses drive your debt repayment options. If you make significantly more per month than you spend, then you should strongly consider setting up debt repayment plans with your individual creditors.
If you make a lot of money, and you do decide to file a bankruptcy, then you may be required to repay all or a large part of your debt back to the creditors. In so doing, you have forfeited the ability to try to negotiate the balances on the debts, and you have paid your attorney and your Trustee to oversee your case.
Unless you gain something extra by filing the bankruptcy, then it may not be your best option. That something extra for you may mean the ability to can catch up your mortgage payments over time, surrender your home without penalty, or pay off your student loans or tax debt in a finite time.
YOUR EMPLOYMENT DEPENDS UPON YOUR CREDIT SCORE.
Several professions, especially those that require major financial responsibilities, place a large value upon credit score.
Filing for bankruptcy will have a negative impact your credit score. But the bankruptcy may only have a relatively small impact on your score because of the history of late payments, large debts, and other financial issues that drove you to file for bankruptcy in the first place.
Current and future employers cannot discriminate against you because you filed.
YOU HAVE ASSETS THAT YOU DO NOT WANT TO LOSE.
If you have more equity in your home or belongings than you can protect by law, then you run the risk of losing that asset if you file for Chapter 7. The Trustee would see if taking the asset makes money for your creditors, and if so, then the Trustee will require you to turn it over.
You have 2 options in this situation:
1. File Chapter 13 bankruptcy, and repay your creditors the value of the asset, which could require you to repay most or all of your unsecured debt.
2. Sell the asset yourself and negotiate with your creditors with the proceeds outside of bankruptcy.
EVEN WITH A DISCHARGE, YOU DO NOT HAVE ENOUGH MONTHLY INCOME TO MEET YOUR MONTHLY EXPENSES.
Bankruptcy is designed to be a springboard to a new life. It should help you not only in the short term, but the long term as well. Ideally, without the burden of your debts, you can save, make your income work for you, and plan for your future. The last thing you want to do is to file a bankruptcy where you have no hope of a better life upon its completion.
As an example, if you have monthly income of $2,000, but your monthly expenses alone are $2,500, then filing for bankruptcy does not help you in the long run. Bankruptcy provides you some relief by eliminating some debt, but you will be right back where you started in a matter of months because your income is greater than your expenses.
If you do not have the means to move on with your life after bankruptcy, then it may not be the right time to file.