By: Jeena Cho

One of the most compelling reason to file for bankruptcy is if you cannot afford to pay your monthly living expenses and your debt. There comes a point where a person has so much debt that no amount of budgeting or living on beans & rice will make a bit of a difference.

If you are reading this blog, you probably already know about the two different bankruptcy (Chapter 7 and Chapter 13). Many people think they don’t qualify for Chapter 7 bankruptcy because their income is too high. That is true but not always. It’s possible that an above median income earner can pass the Means Test due to payments on secured property, or high medical costs. If majority of your debt is non-consumer (meaning business related) you don’t have to pass the Means Test at all.

If the client does not qualify for Chapter 7, the next step is Chapter 13. Here are three things to consider.

• I will have to pay back all of my debt. Rarely is this the case that the client’s income is so high that he or she will have to pay back 100% of the debt. Even if you do end up in a “100% plan” meaning all of your debts have to be paid back, you generally pay it back with no interest and no penalties.

• I don’t want to be locked in for five years. I get it. The idea of having to write a check every month for five years is not too appealing for most people. However, ask yourself - what are my alternatives? Are you expecting a big raise at your job where you’ll be able to tackle the debt on your own? Are you willing to continue on your current track making the minimum payments? Or deal with creditor harassment?

• Learn to save. Imagine after your Chapter 13 plan being debt free. No more harassing phone calls, threats of law suits or wage garnishment. Just be debt free. By the time you are done with your Chapter 13 plan, you should be used to setting aside certain amount of money every month for the plan. Now, that money is yours to save. Think of what you can do once you are debt free.

Bankruptcy is the beginning. Not the end. Is it scary? Yes. Will you be better off debt free? Are there other alternatives to filing? These are all the questions one should answer before filing. Bankruptcy should be the last resort, but it’s not the end, but a beginning.

Disclaimer: Please read our disclaimer. Unless you have hired JC Law Group as your attorney, there is no attorney-client relationship. This article is not intended to be legal advice. Obviously, you should consult with an attorney about your particular situation.