Are creditors calling relentlessly? Do your monthly bills for past debt far exceed your monthly ability to pay? Do you lay awake at night trying to figure out what to do? Are you among the many individuals considering bankruptcy in this economy?

Who Files for Bankruptcy?

If you are considering bankruptcy, you have debts you do not believe you can repay. If you are considering bankruptcy, you are also concerned about the consequences this will have on your future.

There is a cost-benefit analysis that every person considering bankruptcy must engage in before making the ultimate determination.

  • Most people considering filing for bankruptcy do not have a lot of extra, non-necessity assets. This will be a large factor in analyzing whether bankruptcy is right for you.
  • Whether your debt is so large that a restructuring of minimum monthly payments will not be sufficient based on your current and expected future income will be another large factor, of course.
  • A third important factor will be the type of debt you have. If the majority of your debt is dischargeable in bankruptcy, like credit card debt, this weighs in favor of filing for bankruptcy. If the majority of your debt is not dischargeable in bankruptcy, like student loans and child support, this weighs against filing for bankruptcy.

Benefits of Bankruptcy

The major benefit of filing for bankruptcy comes from the chance to begin fresh, without the stressful mounds of existing debt, and begin rebuild your credit. The drawback of filing for bankruptcy is that your credit report will show, for ten years, that you filed for bankruptcy and you must rebuild your credit by establishing new credit card accounts and making the required payments at the required times.

Your Assets After Bankruptcy

In analyzing what assets you will be able to keep and what will be sold in order to pay your creditors, you will see that many, many people are able to keep most of their assets after filing for bankruptcy.

Certain property is considered exempt from being taken in bankruptcy. Exempt property or assets may include your primary home, one car, work equipment, a limited amount of jewelry, basic necessities like clothing, furniture, and appliances. Exempt property or assets may include pension payments, social security benefits, workers’ compensation benefits, retirement accounts, insurance payouts, unemployment payments, as well as many other types of property and assets.

What property and assets are exempt will depend on whether you are using the federal or state exemption list. You may not choose to use both lists.

The federal list usually provides for more protection due to a catch-all provision. However, if you have a lot of equity in your home, the Minnesota list probably provides you with more protection.

If you have non-exempt property or assets, they will be liquidated, or sold, by order of the court. The money from the liquidation, or sale, is then used to pay back your creditors, proportioned to each based on the amount available and the amount owed. However, many people filing for bankruptcy do not have non-exempt property, and therefore, there is nothing to sell.