The purpose of bankruptcy is to give the honest, unfortunate person a fresh start. Everyone deserves the right to put the past behind them and to have a clean slate. Bankruptcy can be complicated and if someone is considering bankruptcy there are many issues to be aware of– a successful case requires full financial disclosure with a bankruptcy attorney and a careful review of the current and past financial situation.
I have seen numerous people go through bankruptcy and come out with a real chance of making a better life, free of the financial burdens of the past misfortunes. Many women and men going through divorce do not have sufficient income to support themselves and their children, and take care of essential needs such as health insurance and saving for retirement. For someone who has suffered a major financial set back such as a divorce, loss of a job, or major medical expenses, bankruptcy may be part of the beginning of a new financial life.
Hypothetical Case Example #1 (taken from real life)
A woman is working three jobs in order to pay a mortgage, car payment, credit cards, medical debt, student loans, and support children (maybe even adult children who cannot find jobs). There is no money left for her to pay for her own health insurance or go to regular doctor or dentist appointments, or to save for retirement. Bankruptcy may allow her to reduce her expenses by eliminating the credit card and medical debt, and enable her to keep her house and car, as long as she stays current on the mortgage and car payments. Student loan debt is not ordinarily dischargeable unless the person can show undue hardship. Bankruptcy may allow her to reduce her expenses enough so she can buy health insurance. She may consider surrendering her house or car if they are more expensive than she can afford. With the reduction of her monthly expenses, she may be able to reduce her work hours, improve her health, and spend time with her family.
Hypothetical Case Example #2 (taken from real life)
A couple with minor children want to divorce and are successfully working together in order to do what is best for their children and keep their attorneys fees to a minimum. They are using a divorce mediator in order to reach an agreement as to child custody and visitation. They realize that after they have two households they will not be able to pay their joint credit card debt, medical expenses, and perhaps their mortgage and/or home equity line of credit. They may not be able to sell their house and may need to let the house go to foreclosure. If they are getting along well and if their income is within the allowable limits (for a chapter 7), they may be able to do a joint Chapter 7 bankruptcy prior to the divorce and eliminate their debt and both get a fresh start.
THIS IS NOT LEGAL ADVICE. THE ISSUES CAN BE COMPLICATED AND A CONSULTATION WITH A BANKRUPTCY ATTORNEY IS ALWAYS
IMPORTANT IN ORDER TO EVALUATE ALL OPTIONS.