Lyndon Ruhnke, PC
When Is Filing for Bankruptcy a Good Option?
Filing for bankruptcy is often seen as a last resort when a person or entity can no longer meet financial obligations. When debt becomes overwhelming, filing for bankruptcy could be the right answer depending on a person’s unique circumstances. Bankruptcy has successfully helped tens of thousands of Oregonians break free from suffocating debt.
According to the United States District Court for the District of Oregon, there were 892 bankruptcy filings in Multnomah County in 2020. Most bankruptcy filings pertain to consumers who choose from either Chapter 7 or Chapter 13 bankruptcy.
Although individuals in debt can file for bankruptcy without the help of a legal professional, it is a good idea to consider how a Portland bankruptcy lawyer can help you. Filing for bankruptcy should not be seen as embarrassing or shameful. Rather, by filing for bankruptcy, consumers are taking action to discharge debt in the most feasible, responsible way possible.
Assess Your Financial Situation Before Filing for Bankruptcy
Filing for bankruptcy is not a decision to be taken lightly. A full and thorough evaluation of personal finances is a good first step before acting quickly to file for Chapter 7 or Chapter 13 bankruptcy, an act which becomes public record. Personal financial considerations that may be discussed with a bankruptcy lawyer before filing include, but are not limited to, the following:
- Comparing the amount of income from all sources with total amounts owed to creditors (total combined debt);
- Calculating total monthly debt obligations (such as credit cards, mortgages, car loans, installment loans, payday loans, healthcare expenses, tax debt, and student loans);
- Determining what bills are overdue and/or in collections and whether collectors are calling or otherwise making contact; and
- Evaluating other options for paying off debt, such as debt settlement or credit counseling
A Gresham bankruptcy attorney will discuss all possible options with clients before deciding which path is the best to achieve financial relief.
What Are My Bankruptcy Options?
United States bankruptcy laws allow both individuals and businesses to seek debt relief by filing a petition in court. The two main types of bankruptcy for individual consumers are Chapter 7 (liquidation) bankruptcy and Chapter 13 (repayment plan) bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a quick plan to eliminate debt. With a Chapter 7 proceeding, an individual’s assets are sold or “liquidated” to satisfy outstanding debts. One good thing about Chapter 7 bankruptcy is that creditors typically accept less than what is owed. In other words, creditors will take what they can get from the sale of assets. The Chapter 7 process can take three to six months to complete.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a debt relief option that allows individuals to establish a repayment plan approved by the court that enables them to make smaller payments and keep their assets. The Chapter 13 process can take a few years or longer but is often the best option for many people. Each month, individuals make monthly installment payments that are distributed amongst all creditors. Once all debts have been paid in accordance with a repayment plan, the court will discharge or “close” the bankruptcy.
Debts You Must Pay in Full
Filing for bankruptcy can be life-changing, providing you with a fresh start financially. However, it is important to keep in mind that some debts cannot be forgiven in a bankruptcy proceeding. These debts include the following:
- Child support payments
- Alimony/spousal support payments
- Taxes (local, state, and federal)
- Student loans
While some debts are not forgiven, the creditors may agree to a reasonable repayment plan, which is best achieved with a Chapter 13 bankruptcy.
How Does Bankruptcy Affect My Personal Assets?
As previously stated, Chapter 7 bankruptcy is the best option to eliminate debt quickly, but to achieve financial relief quickly, an individual must agree to sell or liquidate personal assets. Such assets include homes, other real estate or land, vehicles, retirement accounts, pensions, and anything else of value that can pay off debt.
Lyndon Ruhnke, P.C. Can Help You Eliminate Debt
Filing for bankruptcy puts the pause on creditor harassment and the stress of falling further behind on your bills each month. To find out whether bankruptcy is right for you or whether another debt relief option may better suit your situation, contact bankruptcy attorney Lyndon Ruhnke today. Lyndon Ruhnke, P.C. serves clients throughout the Portland area, with offices located in Portland, Gresham, and Beaverton.