Have you recently thought: 'Is bankruptcy right for me?'

Morton J. Grabel, Esq.

For many people, declaring bankruptcy is not only a financial decision; but sometimes a personal one. Therefore, no one can really advise you if it's right for you.

However, factors such as the stigma of filing bankruptcy has considerably lessened over the years. Moreover, the Federal Government has deliberately carved out a place in the IRS Code (for example a Chapter 7) for individuals who need a fresh start by filing bankruptcy.

In light of the preceding, consider the following:

Can you file for bankruptcy?

If you have enough money to pay your creditors, you may be ineligible to file for bankruptcy.

Question - How would the bankruptcy courts know if you are qualified to file for bankruptcy?

Answer - You will be required to complete specific paperwork, show recent tax filings and pass the "means test" created within the Bankruptcy Reform Laws. If you make less than the median income established in California, you may qualify. On the other hand, if your income exceeds that figure and you have money left over after paying your necessary monthly expenses, you might not be able to file.

Your immediate future is bleak and you do not predict it getting better without filing bankruptcy.

Question - But what if you know your hardship is temporary? What if you foresee better cash flow in the next couple of months or six or even eight months from now?

Answer - You may want to wait it out. When your financial circumstances improve, you can pay down more of your debts. But then again, only you know if you can endure the pressure of collections letters, services being cut-off, debt collectors calling you and creditor lawsuits being filed against you.

Ok, but what if a) your debts are long term, b) your income continues to dwindle, c) there is a no light at the end of the tunnel and d) most debts are unsecured?

Question - Will all of your debts and liabilities go away in bankruptcy?

Answer - Bankruptcy discharges most unsecured debts such as credit and charge card balances, medical bills, collection accounts etc.

*Note: Other debts like student loans, certain tax debt, certain legal bills and child support arrearage may not go away even though they are unsecured. In addition, liens on a secured debt like a mortgage or a car loan may remain your obligation to pay unless there is a "cram down". So look at your liabilities: If the bulk is dischargeable, you may wish to file a chapter 7 bankruptcy. [There is also a chapter 13 bankruptcy, but that is for another day].

Be sure you thoroughly understand the downside of bankruptcy and the conditions that must be met in order to be successful in your bankruptcy.

Question - What exactly do you mean the downside and the conditions of bankruptcy?

Answer - For example, your credit rating score will drop and the bankruptcy filing will be on your credit report for a long time. Also, there are some simple conditions that must be met: a) For example, you will be required to take a Pre-Bankruptcy Credit Counseling Course after you file your petition for bankruptcy. The course is inexpensive and takes usually about 60 to 90 minutes to complete. b) There is also an inexpensive Post-Bankruptcy Debtor Education Course. The course is usually a little more than two hours and must be completed no later than the 45^th day after the creditor’s 341 meeting. Both courses can be taken on-line by computer or by telephone. Joint bankruptcy filers can take the courses together.

Please note the information provided above is general and must not to be relied upon for your specific legal needs. *You should always consult an attorney to answer your legal questions. For more information about bankruptcy or other legal matters, contact the Law Offices of Morton J. Grabel in Temecula at (951) 695-7700.