Making the decision to file for personal bankruptcy should not be taken lightly. Declaring bankruptcy can have long-term financial consequences. However, for some New York residents, it can make funds available to take care of necessary expenses. Some of the people who may benefit the most from bankruptcy are couples who were recently separated or divorced, senior citizens and the unemployed.
Debts are typically assigned to one spouse or the other in a divorce decree. If the spouse who was ordered to pay a debt declares bankruptcy, the other will still be responsible for the balance and the creditor may take collection action against them. Couples sometimes choose to file for bankruptcy together prior to their divorce to discharge all of their joint debts. Many seniors live on fixed incomes. When faced with debts that exceed their income, bankruptcy may be an effective way for them to keep more of their limited funds. Federal and state exemptions allow homeowners to keep all or a portion of their home equity, their retirement accounts and Social Security income. If they are eligible for Chapter 7 bankruptcy, they can eliminate their credit card debt and medical bills so they can live more comfortably in retirement.
Another group of people who might benefit from bankruptcy is the unemployed. People who do not have a job but have a lot of outstanding credit card debts can often get relief by filing Chapter 7 bankruptcy. This strategy may be able to help an unemployed person survive until they are able to find work.
An attorney with experience in bankruptcy law may help a client determine whether they are eligible for Chapter 7 bankruptcy based on the current guidelines. When Chapter 7 is not an option, Chapter 13 bankruptcy may be able to give a client some relief from financial stress by reorganizing their debts and making the monthly payments more affordable. A lawyer can explain the process to help a client make the best decision based on their circumstances.
Source: GO Banking Rates, “5 Signs It’s Time to File for Bankruptcy”, Morgan Quinn, Feb. 18, 2015