Bankruptcy is a safety valve built into the system to allow people to get back on track when financial woes threaten to irrevocably undo and derail them. Society is best served by a solvent populace that earns, spends and pays taxes, so if people fall as they sometimes do, this mechanism is to help them get back up.
The goals of bankruptcy
- To help a debtor get a fresh start by shedding the debt load they cannot possibly resolve
- To protect creditors to the extent possible so they can recoup some portion of their losses
When is bankruptcy the right course of action?
Any reversal of fortune, be it unemployment, illness, accident or natural disaster can push a person to the brink of despair. If the financial fallout is severe, bankruptcy might be a better route than facing defaults, repossessions and lawsuits.
Depending on your circumstances, it could save your home. And it might save your health as well because the stress of facing debt collection actions could be debilitating.
Taking this path, though, is not without its consequences. A Chapter 7 bankruptcy will be a blot on your credit record for 10 years, and a Chapter 13 bankruptcy will show for seven. Credit cards will be taken away. It will be a challenge to rebuild credit, secure loans, and get certain jobs.
The filing fee in New York for a Chapter 7 bankruptcy is $338, but it can be waived if certain guidelines are met. It’s wise to consult first with skilled counsel experienced in this area of the law.