One of the questions I get asked most during a free consultation is whether or not I think that someone has enough debt to file bankruptcy. This can be a tough question, and I try not to weasel out of answering it with typical lawyer answers.
First, it is really up to my potential client to decide whether or not to file bankruptcy. Ultimately, he or she is going to have to live with the consequences. My job is to help them through the process and make it as easy as possible.
Nevertheless, during my consultations, I go over the all of my potential client’s debt and add it all up. From there, we can talk about how long it would take her to pay down her debt, based on her current income. If the debt consists of mainly high interest rate unsecured debt, such as credit cards, and adds up to more 35-40% of her before tax salary, it is going to take a very long time to pay off, maybe ten or more years.
I also want to find out if bankruptcy will actually give her the kind of relief she’s looking for. If most of her debt is student loans, she’s still going to have that after she goes through bankruptcy. It doesn’t make sense to me to file bankruptcy if it really isn’t going to make any difference to you financially once you go through. If she’ll still be struggling to make ends meet, maybe it’s time to look at other options, such as reducing your monthly expenses like rent or your mortgage.
So you see, there really isn’t a clear cut answer as to how much debt you should have before you file bankruptcy. For some, filing bankruptcy when they only have $15,000 in credit card might make sense. For others, that number might be much higher.
Bankruptcy should be an option of last resort. It’s going to stay on your credit report for ten years and may impact your ability to get a job. Ask yourself whether or not your financial situation is long-term or temporary.
The best way to analyze your situation is by having a long conversation with a bankruptcy attorney. Tell her everything. After your conversation, give it some more thought. Only then can you be sure that bankruptcy is your best option.
If you have questions about whether bankruptcy is a good option for you, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy lawyer. You can call 303.331.3403 to schedule an appointment or use our online scheduling system.