Chapter 7 bankruptcy is all about discharging debt. When determining whether to file Chapter 7 bankruptcy, the main question that needs to be asked is can you afford to repay your debts. FIrst, take a long look at your budget. I don’t mean simply writing down a list of your bills. You need to figure out what you spend money on. Print out copies of your bank statements for the last six months. Go through each statement line by line and put the debits into a list divided up by categories. For example, you could use categories like food, recreation, clothing, utlilities, etc. Once you have reviewed your monthly expenses you may find that you spend much more money than you realized you do on things like eating out and recreation. Then determine whether or not you can cut some of these expenses.
Once you have reduced your expenses by setting a budget without unnecessary expenses, it should be fairly obvious whether or not you can afford to pay your debts off in a reasonable amount of time. What is a reasonable amount of time is different for each person based upon their own perspective. If you are fairly young then taking five years to pay off credit cards may not be a problem. However, if you are fifty years old and need to think about retirement, then five years can greatly impact your financial future.
Other considerations are whether the majority of the debt is nondischargeable. If the majority of the debt is child support arrears, student loans, or income tax, then filing Chapter 7 bankruptcy will not help your financial situation. If the debts are primarily credit cards, medical bills, or other unsecured debt, then filing Chapter 7 bankruptcy will wipe out the debt with little or no repayment to creditors, depending on your nonexempt property. In Texas, there is no liquidation of assets in most Chapter 7 cases, so the cost of filing is minimal.