When Bankruptcy Might Not Be the Best Option

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Bankruptcy is not appropriate for every financial situation. Moreover, not every type of bankruptcy works for every type of debt. Before you decide to file a bankruptcy petition in court, you should review the amounts and sources of your debt and expenses with an experienced bankruptcy professional, weigh your options and determine whether bankruptcy actually offers the solutions you seek.

While Chapter 7 bankruptcy provides for a general discharge of your debt, not all types of debts are dischargeable. If your problem debt comes from nondischargeable sources, you may need to consider alternative forms of bankruptcy like Chapter 13 or even non-bankruptcy alternatives:

  • If you are struggling to keep your home, Chapter 7 may not be a good option. Chapter 7 usually does not discharge mortgages and other secured debt, and it may actually require you to sell your home as part of the bankruptcy liquidation. Direct negotiation with your mortgagee or a payment plan under Chapter 13 may be better options in this case.

  • Some unsecured debts are also nondischargeable. These include domestic support obligations and arrears, criminal fines, and civil judgments for intentional or reckless conduct. Chapter 7 does not discharge these debts, although it may make them more manageable by discharging other debts.