|Question: I can't pay my bills. Should I declare bankruptcy?|
If you're unable to meet your financial obligations, you should investigate a number of options before considering bankruptcy. If your income has been reduced (e.g., because of illness or unemployment), you might consider cutting down on your monthly expenses, taking advantage of unemployment and public assistance, and liquidating assets. Another option is to restructure your debts. Debt restructuring involves negotiating new repayment terms with creditors so you can meet your monthly expenses and pay off your debts within a reasonable amount of time.
You should consider hiring a professional credit counselor to assist you in restructuring your debts. Professional credit counselors will contact your creditors and attempt to negotiate affordable repayment terms for you. If you can't afford to hire a credit counselor, you may find help at your local Consumer Credit Counseling Service (CCCS) office or other nonprofit credit counseling service. These nonprofit companies provide basically the same services as a professional credit counselor but at little or no cost to you. Hiring a credit counselor now will help you even if you decide to declare bankruptcy later, because you may need to submit a certificate to the bankruptcy court that states you've received a briefing from an approved credit counselor in the six-month period prior to filing.
If you decide that bankruptcy is your only option, you may file for personal bankruptcy under Chapter 7 or Chapter 13. Chapter 7 bankruptcy can remove obligations to repay certain outstanding debts but requires you to liquidate certain assets and use the proceeds to pay creditors. You can only file under Chapter 7 if you pass an income eligibility test. Otherwise, you must file under Chapter 13 for relief, which institutes a payment plan to repay creditors over a three- or five-year period. A bankruptcy attorney can help you sort out your options.