You might be surprised to see a bankruptcy attorney posting reasons not to file bankruptcy, but it shouldn’t. Bankruptcy is not the right financial solution for everyone, and there are times when it might be detrimental to seek relief from the process. We often talk about why you should consider bankruptcy, but there are also some situations that you shouldn’t.  

Filing for bankruptcy can stop a foreclosure or car repossession, help avoid wage garnishment or relieve overwhelming credit card debt. Bankruptcy is a serious endeavor that requires a thoughtful decision based on reality and facts.  

5 Reasons To Forgo Bankruptcy

  1. You Can Afford Your Debt:  If you can afford to make your credit card payments – but simply don’t want to – bankruptcy is not for you. Bankruptcy is considered a last resort for those whose debt is overwhelming and cannot be paid. Those who file are subject to a means test to establish the inability to repay the debt obligations. This may involve a 90-day minimum of non-payment or proving to the court that you do not have the assets to cover your debts. 
  2. Your Debt Is Non-Dischargeable: Not all debts can be eliminated in a bankruptcy case, so if your debt is primarily in these categories, bankruptcy does you little good. Taxes and student loans are typically non-dischargeable. Income taxes can only be discharged in Chapter 7 bankruptcy and under strict conditions. Student loan debt became ineligible for bankruptcy in 2005 when the tax code was amended. Student loan debt may be discharged in extreme hardship cases – typically those involving dependents. 
  3. You Don’t Want Damage to Your Credit Report: Bankruptcy can devastate one’s credit. Those in true financial crisis may have already significantly lowered their credit score, and bankruptcy is a positive move towards eventual restoration. But those simply looking for an “easy out” may not want to suffer the long-term effects. Chapter 7 bankruptcy will be visible on your credit report for ten years and can make it very challenging to buy a home or car and even to rent an apartment without a cosigner. Therefore while bankruptcy is an excellent tool with few options – it is not to be taken lightly. 
  4. Your Case is Made a Public Record: Because bankruptcy is a type of government debt relief, it is considered a matter of public record and made viewable to anyone who goes through the necessary process to find the information. Though less common today, some towns and municipalities still announce bankruptcy notices in the local newspaper. 
  5. You Haven’t Attempted a Settlement:  Sometimes, you can get relief simply by working directly with your lenders. If you contact them and ask for a restructuring of your debt, you may be able to fix your situation without a legal process. Additionally, debt settlement programs may help you repay a lesser debt in 12 to 48 months without having a bankruptcy on your credit report. It would help if you investigated these options before filing bankruptcy paperwork.

Even though bankruptcy is not for everyone, filing for bankruptcy is the best solution in many situations. The best way to determine your next best course of action is to speak with an expert. An experienced bankruptcy attorney can help you to assess your current situation, discuss the options, and make the best choice for you. 

Richard V. Ellis is an established bankruptcy attorney who has helped hundreds of Sarasota residents to regain their financial footing. Call our offices today if you need a fresh start and are ready for the harassment and anxiety to stop.