How do you determine when to file for bankruptcy?

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How do you determine when to file for bankruptcy?

I’m 25 years old and working on my Master’s in school. I have over $20,000 worth of student loans, $8600 remaining on my car, over $10,000 worth of credit card debt. I live with my mom and she is unemployed. I have to help out at home and my bills have gotten neglected. I tried consumer credit counseling but I don’t make enough to make payments, help at home, and pay car note. I want to include the car in bankruptcy but I’ll have no transportation. I don’t know what to do, I make a little over $1,000 a month. To make matters worse I joined a gym and now have to pay for membership that I can’t afford.

Asked on June 14, 2011 under Bankruptcy Law, Indiana

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Each individual's situation is different in terms of whether or not to file for bankruptcy.  If income is less than debt and it isn't possible to pay the debt(s), then bankruptcy may be an appropriate solution.  If bankruptcy is an appropriate solution, the type of bankruptcy depends on one's income and other factors.  Chapter 7 is straight liquidation which wipes out the debts.  Under Chapter 13, you would have a plan (budget) that would be followed for repayment of the creditors.

In your situation, you probably won't be able to discharge the student loans in bankruptcy.  The credit card debt would be dischargeable in bankruptcy.  As for your car, you could reaffirm the debt which means keeping the car and working out a payment plan with the creditor.

Based on your income, you should be eligible for Chapter 7.


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