When Bankruptcy is The Wrong Choice

Pen and Petition for Bankruptcy

Bankruptcy may be the wrong choice. If you are in any of the following situations bankruptcy may be a bad option:

  1. You have only a few debts and strong defenses.
  2. The debts at issue are secured by your property such as a home mortgage or car loans and you do not have sufficient income to keep up payments and also catch up on past due amounts.
  3. You have valuable assets that are not exempt from the bankruptcy process.
  4. Because of prior bankruptcy, you cannot receive a discharge in Chapter 7.
  5. You can afford to pay all of your debts without hardship.
  6. The debts that you have are non-dischargeable, such as student loans, taxes, child support, court-ordered restitution, etc.

Bankruptcy is a major negative on your credit history and will stay on your credit history for 10 years. However, by the time a person is in a position to need protection from creditors they usually have a negative credit history anyway. Your ability to obtain a loan may actually improve after bankruptcy because a bankruptcy removes debts and improves your debt-to-income ratio. Further, since a person can only file bankruptcy once every six years, many creditors see a decreased risk in making loans to people after a bankruptcy.

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