Am I a Good Candidate For Bankruptcy?

by Gary Foreman

Bankruptcy is not the right financial solution to all debt problems, but it might be for yours. Take a look at these guidelines to find out if you are a good candidate for bankruptcy or if you should consider other options first.

Our purpose with this post is not to qualify you for bankruptcy.

Our goal is to help you decide whether it would be a good idea to contact a counselor to help you make a final decision.

Let’s look at some bankruptcy facts, and then you can decide whether filing for bankruptcy could be the right solution to your debt problem.

Bankruptcy Protection Does Offer Some Advantages

Among them are:

• You’ll eliminate your credit card balances.
• You’ll eliminate any medical bills.
• You can stop a foreclosure on your home.
• You can stop wage garnishment.
• Collection calls will be stopped.

Some of your possessions are protected in bankruptcy. That means the creditors can’t take them from you. They include your home, car, furniture, and wages.

It’s important to remember that all of your bills are not automatically included in the bankruptcy filing. You can choose to exclude specific bills and continue to pay them. You also risk overlooking bills that you wanted to include in the bankruptcy but didn’t.

Some Debts Won’t Be Discharged in Bankruptcy

They include:

• Most taxes
• Child support
• Alimony
• Most student loans
• Court fines and money owed due to criminal offenses
• Money owed others due to personal injury caused by driving under the influence of drugs or drink

Are You a Good Candidate for Bankruptcy?

Consider these items:

Good Candidate for Bankruptcy:

• Your debts would take more than five years to repay.
• You cannot meet all your commitments on your present income.
• You have assets you want to protect from creditors – like your home.
• Your creditors are threatening or have started taking legal action to collect.
• Dealing with your debts is causing emotional distress or affecting your relationship with your spouse.

Bad Candidate for Bankruptcy:

• You can pay off your debts in 5 years or less.
• It could affect your job. It is illegal to fire someone for declaring bankruptcy, but some companies will check your credit score if you apply for a job with them.
• You’ll have trouble getting over feeling like a failure if you file for bankruptcy.
• Some or many of your debts cannot be discharged in bankruptcy.

Contact a debt counselor if you think you may be a good candidate for bankruptcy. They’ll be able to get your specifics and recommend a course of action.

If you have significant debts but feel that filing for bankruptcy isn’t for you, then you might want to consider credit counseling as an alternative. TDS recommends contacting the Financial Counseling Association of America (FCAA) to find a trustworthy counselor. Their standards ensure that consumers with problem debt will receive expert help from professional organizations they can trust.

Take Action Now:

• If you think you are a good candidate for bankruptcy help, contact a debt counselor. Don’t put your finances in further jeopardy.
• If you are not a good candidate for bankruptcy or do not feel comfortable pursuing bankruptcy, see if you might be a good candidate for credit counseling.
• Understand what the future may have in store for you if you decide not to do anything about your debt.

If You’d Like Help Outside of Bankruptcy

If you’d like to consider other debt payoff options before considering bankruptcy, or if it does not look like you will qualify for bankruptcy, consider the TDS ebook How to Conquer Debt No Matter How Much You Have.

We will walk you through creating your own personalized debt payoff plan tailored to your debt burden, budget, and lifestyle. You can read more about it here.

• Avoid These 8 Mistakes When Filing Bankruptcy
• Declaring Bankruptcy In Retirement: What You Should Know
• Debt Consolidation: Is It a Good Deal?

Reviewed September 2023

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.