Well, deciding to file bankruptcy is a really personal decision, but there are a few red flags which probably mean it’s a really good option. So, if you’re considering going into your retirement account and borrowing money to pay off unsecured debts like credit card debts and medical debts, that’s a pretty good sign that it might be time to file bankruptcy. Look, your retirement funds are earmarked for your retirement. They are 100% exempt in bankruptcy. So, if we file a bankruptcy for you, nobody can touch your retirement account. So why would we take the money out of your retirement account and pay off debts that are dischargeable in bankruptcy? It probably doesn’t make sense.
If you have credit card debts that are going to take longer than five years to pay off, taking into consideration the interest, I mean, most credit card debt is accruing at 25% to 29% interest. If you’ve got $50,000 in credit card debt, you’re paying an enormous amount of interest on that debt every year. Chapter 7 bankruptcy will allow you to pay none of that debt. Chapter 13 bankruptcy will have you pay pennies on the dollar most of the time. That usually is a good indication, if it’s going to take longer than five years to pay off your debt.
If you are about to retire and your income is going to be reduced and you’re going to be living on a fixed income, and that fixed income can’t support your unsecured debt load, that’s a good indication that bankruptcy might be a good option for you.
If there’s a wage garnishment. If your house is about to be lost in foreclosure, all good reasons to think about bankruptcy as a fresh start.