Should I File for Bankruptcy?

By Octavio Velarde on August 24, 2020

Whether to file for bankruptcy is a personal decision and will depend on the circumstances particular to each individual.

However, when deciding whether to file, you should keep in mind the purpose of a bankruptcy: a fresh start.

A bankruptcy is a powerful tool that can allow individuals to discharge (or cancel) bad debts and start a new financial life. The purpose of this fresh start is to allow you to take control of your finances, hopefully, with a better understanding of, and ability to manage, your financial life.

People look for a fresh start for numerous reasons. Sometimes people are looking to start again after an unexpected set back like losing a job, an illness, a divorce, or even the passing of a family member. These are events that are often outside of our control, unanticipated, and can have a significant effect on your finances. The coronavirus pandemic is a perfect example of an event outside of our control that has drastically affected the financial lives of many people unexpectedly.

Other people look for a fresh start to get out of the downward spiral of bad debt. Bad debts will often lead to bad credit leading to more bad debt which only degrades your credit more. A bankruptcy is one way to stop the cycle. Bad debts may be, for example, loans with high interest rates (no matter how many payments you make, the balance never seems to go down), or upside down debts (you owe more than the value of an asset), or merely having miscalculated how much debt you can reasonably pay back.

woman smiling while working behind coffee shop counter

Whether you have faced an unexpected loss or got stuck in the bad debt spiral, a bankruptcy discharge can allow you to cancel your debts to give you a chance to get back on your feet. However, a bankruptcy discharge will only cancel debts that existed at the time of your filing. Any debt that you accumulate after you file for bankruptcy will not be cancelled.

Ideally, after a bankruptcy, you will not only have fewer financial burdens, but also be financially stable and in a position that you do not need to immediately accumulate more debt that cannot be discharged. So, for example, if you have lost your job and fallen into debt, you may be tempted to file a bankruptcy immediately. But if you do that, you may immediately be forced to turn to credit cards to pay your expenses while unemployed. You may continue to fall behind on payments because of your unemployment. Remember, the purpose of a bankruptcy is not to replace old debt with new debt. The purpose is to move past a difficult financial situation stronger and better than you were before. So, you may want to wait until you have a new job before filing your bankruptcy. That way, you can cancel your debts once you have an income that will allow you to put your financially stressful unemployment behind you and fully benefit from your fresh start.

If you would like to discuss with an attorney whether now is a good time for you to file for bankruptcy,  contact our office at (619) 330-6870 for a free consultation.

The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

OV Logo Mark

You deserve a fresh start.
Let’s move forward together.