If you are willing to consider bankruptcy, it’s probably a sound choice: most people don’t come lightly to the bankruptcy decision.
But let’s look at some situations where filing bankruptcy isn’t necessary.
Your assets are protected
You don’t need bankruptcy protection now if you have nothing that a creditor with a judgment could take from you:
Federal law makes social security income exempt from creditor’s claims. That protection not only keeps a creditor from intercepting your payments but also protects the payment in your hands, as long as it’s traceable to your social security benefit.
Total debt is small
If the total you owe creditors is small relative to your income and you have significant remaining work life, filing bankruptcy may not be wise.
Bankruptcy is available only at intervals set by law. You don’t want to use up a valuable right which you may need in the future if there’s an unexpected crisis .
Settling with creditors works best, if at all, when you have a small number of creditors. The chances of getting all creditors to agree to a settlement you can live with are greater when there are fewer players.
My experience is that debt settlement isn’t a real solution for many because some creditor (or several) will hold out for more than you can pay. Chapter 13 bankruptcy is powerful because the court can impose a uniform settlement on all creditors.
Bankruptcy for mental health
Even when the factors above suggest you don’t need to file bankruptcy, there are times and situations when bankruptcy is still the better choice.
Even if you are collection proof, if your financial situation causes such stress that it interferes with your ability to work, parent, or sleep, perhaps you should consider bankruptcy.
Bankruptcy can protect your mental health as well as your financial health. The law, backed up by a federal judge, will make collectors stop calling and threatening.
Often, the elderly have trouble internalizing that they are not vulnerable to the demands and threats of collectors.
Bankruptcy may get them peace at their core.