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Loading ...While an attorney can better help you evaluate whether or not you should file, here are some guidelines for when bankruptcy may not be your best option:
You Are “Judgment-Proof”: In the financial industry, this is a term for consumers who have little money, little property, and no joint debts. If a person who is judgment-proof were to be sued, the creditor would have little chance of ever collecting the debt. If you have nothing to lose, why bother going through bankruptcy?
You’ll Lose Property You Want (or Need) to Keep: If you are considering filing Chapter 7, keep in mind that you may have to surrender property that is not exempt or pay fair cash value for it.
You Are Worried About Losing Your Credit Rating: It is true that bankruptcy is usually the worst mark you can have on your credit file. Even those who have paid back most of their debts under a Chapter 13 bankruptcy find themselves rejected for credit. Nevertheless, bankruptcy does not mean you can’t get credit ever again.
Someone Else May Be Saddled with Your Debts if You File: If someone has cosigned one or more of your loans, or if you have joint accounts, the lender can go after the coapplicant for payment once your liability is discharged under Chapter 7. There are ways to keep a cosigner out of the picture, however, by reaffirming a debt or paying off the creditor.
Your Bankruptcy May Be Challenged: Bankruptcy courts are so clogged that most petitions go through without a second glance, much less close scrutiny. Still, your bankruptcy may be challenged if there is evidence of fraud or abuse, or if there is evidence that you could pay back your debts under a Chapter 13 plan.
Visa and Citibank are each getting particularly tough about challenging fraudulent bankruptcies through programs that help them identify and challenge petitions from people they think are trying to “beat the system.” Some of the signs that may alert your creditors to potential abuse include:
- Running up large bills on credit cards just prior to filing.
- Taking out cash advances right before you file.
- Significant changes in spending patterns.
- Continuing to make credit card purchases (especially for nonessentials) after you’ve consulted with a lawyer about your situation.
- Attempts to hide property or income from the court, including recent transfers of large assets to relatives or friends.
- Fraudulent credit applications (applications that falsely overstate income or understate debts, for example).
If you are worried that your bankruptcy petition may be challenged, get a good lawyer and be up-front with her about your problem.
You’ll Need to Borrow Again Soon: While most people who have been through bankruptcy can get credit again, it does usually take a while, especially to get unsecured loans. Bankruptcy can make it especially difficult to rent a home or apartment, so if you have to declare bankruptcy, move before you file.