Many people wonder if they should file bankruptcy based on their debt amount, and a bankruptcy quiz can help you understand your cost, options, alternatives and pros and cons.
For example, deciding to file for bankruptcy is often a confusing decision, especially if your debts are low. Our article discusses debts that are eligible for bankruptcy, how much it costs to file bankruptcy, and the four things you need to know to decide if your debt is enough to file bankruptcy.
Before filing bankruptcy, the two common questions are “how much debt should I have” and “which debts can bankruptcy help me discharge?”
These can be answered with the help of a bankruptcy quiz. For example, a bankruptcy quiz may show you that attorney fees would be $2,500. If your debt is $2,000 you actually may pay more in attorney fees in the debt itself.
The common debts are unsecured debts, secured debts, student loans, and IRS tax debts. Most unsecured debts like personal loans, credit cards, and medical debt are dischargeable in bankruptcy, depending on your case.
There is no specific limit of debt you need to file for bankruptcy, and that is why a bankruptcy quiz can help. If you cannot afford the debt you currently owe, you should consider debt relief options like filing for bankruptcy or other options. For example, if you owe $10,000 and cannot repay within the agreed-upon duration but can pay it back over two years, you might consider filing Chapter 13 bankruptcy. A Chapter 13 bankruptcy is a bit more complicated, so you may get the assistance of a Chapter 13 bankruptcy calculator. The bankruptcy quiz will show you other options to consier as well.
On the other hand, if you have $500,000 in debt and don’t have the income to make repayments, the bankruptcy quiz can show you the cost and the pros and cons of the options. So, you mayresearch and read about different types of debt-relief options, compare them, take a “should I file bankruptcy quiz”, and decide if you would like to proceed and file bankruptcy.
There is no limit to the amount of debt you should have to file for bankruptcy. So, for $20,000 of debt, many individuals may consider filing bankruptcy.
So, if you have any amount of debt that you cannot offset, you are allowed to file for bankruptcy. For example, there are bankruptcy costs to consider. However, just because you can file for bankruptcy doesn’t mean it is always the right thing to do.
Suppose you want to file for Chapter 7 bankruptcy, but you earn a high income and don’t meet the income requirements. You might have to file under Chapter 13 bankruptcy. Chapter 13 offers a flexible repayment plan. So, if you hire a bankruptcy lawyer to help with your case, you might pay on average $3500 for filing and attorney expenses. There are also some administrative fees you might pay in Chapter 13, and during the period of your repayment, you cannot incur debt without consulting the court. Therefore, filing could strain your finances more and is not always the best option.
Bankruptcy cost is a major consideration to consider. For example, you can put together a bankruptcy budget that can help, but it’s important to understand how cost is determine.
If you qualify to file a Chapter 7 bankruptcy using the bankruptcy means test, you might get rid of your debt quickly, usually between four and six months. While you will eliminate debt, you will not be eligible to receive a bankruptcy discharge again in Chapter 7 bankruptcy until an eight-year period lapses. So, within these eight years, if you encounter another financial crisis, lose your job, or become disabled, you will not be eligible for debt discharge even after filing bankruptcy. Therefore, filing for bankruptcy shouldn’t be the first option because you can. Besides, bankruptcy records remain on your credit report for years and could affect your credit score.
There are key differences between bankruptcy vs debt consolidation.
Before filing your petition with the bankruptcy court, it is essential to consider other debt-relief options. To know the best option for you, consider your income, expenses, and debts. As stated a bankruptcy quiz can help you compare these options holistically and the cost of each option.
This is an arrangement where you agree with your lender to pay a lower amount than your debt to offset it. Your lender will be expecting a lump sum payment of the agreed account to get rid of the debt. However, the amount of debt forgiven might be included in your taxable income during the year, increasing your tax liabilities. You can choose to negotiate with your creditor one-on-one. Alternatively, you can hire a debt settlement company to handle the negotiations at a fee.
How much do you earn, and is it sufficient to meet your expenses and repay your debts? If your income is not enough, you might consider how to change your financial situation by:
a.) Increasing Your Income
Will earning more money help pay your debts? If so, you can try to secure a second job to earn more money. You can also ask your employer if they can allow you to work overtime. Alternatively, you can turn a hobby into a business, like painting or sewing. Increasing your income can help eliminate debt without filing for bankruptcy relief.
b.) Reduce Your Expenses
Reducing your expenses leaves more disposable income than you can channel towards debt repayment. As you work to increase your income, you should also reduce your expenses. In some cases, reducing your expenses can help you pay off outstanding debts without increasing income.
Once you consider your income, expenses, and debts, here are some debt-relief options available to you other than bankruptcy:
One way to stop debt collectors could be to use this 11 word phrase, but another way could be to join a debt management program.
A debt managefment program will negotiate the interest rates, so it actually may never go to a debt collector.
This is the process of handling outstanding debts through the help of a third-party negotiator like a credit counselor. The third-party works for you and negotiates with your lenders for low-interest rates. They can also combine all your debts and merge them into one payment. Most debt management programs last for between three and five years
The last thing to consider is how long it will take you to pay off your debts if you consider other options other than bankruptcy. If you are on a fixed budget where you can neither increase income nor reduce expenses, paying off a debt may take longer than someone who can adjust their income and expenses.
Suppose you have outstanding credit card debt of $10,000 and can pay $235 every month at an interest rate of 26%. It might take you ten years to completely repay. This example assumes the lender allows you to make a repayment of $235 every month. In some cases, a credit company may ask for a higher minimum payment every month.
So, if you have limited resources, filing bankruptcy may be more practical. Analyze all factors relevant to your financial situation before settling for the best debt relief options. While bankruptcy may have worked for someone you know, it doesn’t mean it is the best debt-relief option for you. Everybody’s case is unique, and what works for someone else might not necessarily work for you.
A bankruptcy quiz can help you understand the cost, duration, alternatives and pros and cons of each of your option. While Chapter 7 bankruptcy may be the most affordable, you may not want to file bankruptcy, and the quiz can help you understand each options.
After discussing the four factors above, you can make a better decision on whether to file bankruptcy. Are you unsure of what to do? We can help. We have a pool of resources, information, and tools to help you eliminate debt and get a fresh start. Call us today to explore debt relief options and for recommendations on the best plan to help you eliminate debt quickly and affordably.