Written by Ben Tejes
Updated Feb 15th, 2024
This article is for informational purposes only. Ascend does not provide legal advice, and are not attorneys. If you'd like to speak with a bankruptcy attorney that serves your city, you can speak with one in a free consultation.
A common question when facing financial hardship is, “Should I file bankruptcy?", and the purpose of this quiz below is to help inform you whether bankruptcy is right for you. The data includes qualification estimates for bankruptcy income limits for filings from in early 2024. If the income limits for Chapter 7 bankruptcy change in May and November, we will have those numbers already updated in the quiz below.
The quiz below provides the bankruptcy qualification estimate, the estimated cost, a comparison of Chapter 7 and Chapter 13, and the pros and cons of filing for bankruptcy
. The quiz also allows you to compare bankruptcy to alternatives such as debt management and debt settlement.
Also, if helpful, I wanted to add a link to another great should I file for bankruptcy quiz
that you can easily take online to answer your questions about bankruptcy.
This quiz is based on the bankruptcy forms
you would have to fill out to file for bankruptcy. Let's now cover how the bankruptcy quiz works.
How Does the “Should I File Bankruptcy” Quiz Work?
Filing for bankruptcy is an involved process, which includes mounds of paperwork. Parsing through the paperwork to determine whether or not you should file for bankruptcy can be an overwhelming process. Luckily, here at Ascend, we are experts at what qualifications and parameters are required to file for bankruptcy. So we made a quiz that takes all of those qualifications found in bankruptcy paperwork into consideration.
The calculator considers things like your monthly income, the amount of debt that you owe, the expenses you have each month, and more. Once you enter this information, our calculator can help you understand what bankruptcy might look like for you — including things like estimated costs, estimated savings, and estimated timelines.
This quiz will give you an estimated result. We think we can give you some pretty precise information. However, there are typically unforeseen variables that pop up in every bankruptcy case.
What Are Components of The Bankruptcy Quiz?
Our “Should You File Bankruptcy” Quiz looks at two different things: Cost & Qualification.
In order to be eligible to file for Chapter 7 bankruptcy, you have to be eligible. This means that there are certain income factors that limit who exactly can file for bankruptcy
. This limit changes from state to state, but it tends to hover around 1.5x the poverty line in most cases. If you make well above that, you will probably have to find a different form of debt relief.
We also consider the cost of bankruptcy. Even though the goal of bankruptcy is to get you out of a precarious financial situation, there are some costs associated with the process. We take an in-depth look at the average bankruptcy attorney cost, court filing fees, and trustee fees for your state. With that information, we can help you better understand how much you might have to pay to file for bankruptcy.
Hopefully, this can give you a well-rounded look at the benefits of filing for bankruptcy. We also will highlight the potential downsides. This “Should You File For Bankruptcy” Quiz can help you answer whether or not you should file for bankruptcy.
Is Bankruptcy Right For You?
We understand that the decision to file for bankruptcy takes more than just a cost-benefit analysis. There’s more than just a “Should You File For Bankruptcy” Quiz that can tell you. There are other questions you should ask yourself to better understand what filing for bankruptcy can do for you and whether or not it is something you should pursue. Here are some of the most common questions we hear from individuals considering bankruptcy. A Chapter 7 means test bankruptcy calculator
or a Chapter 13 payment plan calculator
can also help when deciding whether to file bankruptcy.
Is It Ever Good To File Bankruptcy?
It can be hard to decide to file for bankruptcy. Oftentimes, there is a bad connotation when it comes to bankruptcy. One common misunderstanding is that you can never recover from filing. Misconceptions like these can make people nervous to even consider filing for bankruptcy. But, the truth is, filing for bankruptcy could be one of the best decisions you can make in an effort to get out from underneath a mountain of debt. Any step forward is a good step. Filing bankruptcy is ultimately your decision. Many people file bankruptcy for the following reasons:
- Medical Debt or Hardship: Have you recently experienced a medical hardship that ended with an extended hospital stay? Or maybe lost wages? You can also file bankruptcy on medical bills as hospital bills can be incredibly expensive, and lost hours working can cause a drastic loss in income.
- Recent Divorce/Change In Marital Status: If you have recently gone through a divorce, you may have realized just how taxing it can be on your financial situation. Not only are you having to divide your estate, but you also have to pay for attorney fees, court dues, and more. It may even end with you having to pay child support or alimony.
- Unemployment: No one plans for unemployment, but when you find yourself without a job, upcoming bills can be terrifying. If you don’t have an emergency fund that can help you take care of your bills and debts until you find a new job, you may not have a lot of options available to you.
- Overwhelming Credit Card Debt: One of the thrills of being an adult is the ability to gain lines of credit that you can use to buy things you can’t outright afford. But when that thrill becomes more of an addiction, and you realize you have more than you can even pay off, getting out from underneath that debt can be daunting.
- Car Loans or Home Mortgages: Typically, when someone applies for a car or home loan, they are in a spot where they feel financially secure and able to take on the payments that will follow. However, should something happen that affects your ability to make those monthly payments, you’re still accountable for the debt. Sometimes, you may even find yourself upside down on a home or car, meaning you owe more money than the object is worth. Many times, this situation occurs, for whatever reason, and forces an individual to either sell the car or home, or file for bankruptcy.
These are just a few of the reasons why people consider filing for bankruptcy. There isn’t a right or wrong reason to consider bankruptcy. What you need to consider is whether or not you need help.
Why Is Bankruptcy A Good Thing?
Bankruptcy helps individuals regain financial independence and stability. The notion that bankruptcy is a bad thing is not true. While there are some initial consequences, getting out of debt can be life-changing. It can radically alter the trajectory of your financial situation. If you think you may benefit from filing for bankruptcy, it’s worth looking into! It’s also important to note that there are other debt-relief options that can be just as helpful. We’ll cover those in just a minute.
What Should You Not Do Before Filing Bankruptcy?
There are many things that you need to do to prepare before you file for bankruptcy. However, there are also things that you should specifically NOT do before filing. These things range from impractical to illegal — but all should be avoided:
- Taking on more debt: It is probably unwise for you to take on more debt if you are planning on filing for bankruptcy. Not only can this change your eligibility for bankruptcy, but it can also increase the likelihood that your creditor will file for an exemption from discharge. This means that, if the creditor can show that you ran up the charges on your credit card, or maxed out your loan limit in anticipation of filing for bankruptcy, you may be expected to pay them back, even after bankruptcy.
- Transferring assets or property to family members: While it may feel as though you can get away with hiding some of your assets or property from the court, attempting to do so can get you in a lot of trouble. Not only is it easy to see if this has occurred, it can also lead to an accusation of bankruptcy fraud if the offense is large enough. Be honest in listing what you own, and you have far greater chances of keeping it through legal strategies.
- Lying about your assets: This is similar to the one above, however, it looks more at the means test than the bankruptcy proceedings itself. When you file for Chapter 7 bankruptcy, you will have to complete a means test to see if you qualify. You would have to make below a certain amount to be eligible. It can be tempting to only disclose a small amount of income or assets in order to qualify, however doing so can lead to your case being dismissed.
- Taking out money from your 401(k): Sometimes, in the face of bankruptcy, individuals have tried to drain their 401 (k) to either quickly pay off debt that they want to keep, or stash the money away so it can’t be taken from. It’s important to realize that your retirement accounts are protected in bankruptcy, and they cannot be touched. Leaving your money in the account is the best move you can make.
How Much Do You Have To Be in Debt To File Chapter 7?
The short answer is there is not a minimum amount of debt
that you need for bankruptcy. As long as you qualify for bankruptcy based on your income, it doesn’t matter whether you have $50,000 in debt, or just $5.00. The real question is, what amount of debt makes bankruptcy the best choice?
Like we mentioned earlier, there are several alternatives to bankruptcy that should be considered. Some work better for smaller amounts of debt, while others can help you tackle larger amounts of debt. The important thing is that you are aware of your options and understand how each option can help you.
Here are some of the bankruptcy alternatives you should consider:
- Debt Settlement: This form of debt relief can be tricky. The goal of debt settlement is to pay off your debt at a lower amount, having some of it forgiven. To do this, you typically work with a company. The company will tell you to stop making payments towards your debt. This forces your account into default. Once your account is in default, creditors may be more open to entertaining negotiations. The debt settlement company would offer your creditors a certain amount. If they accept, then you make a payment and the rest of your debt is forgiven. While this may sound great, there is also a likelihood of getting sued, so proceed with caution. You may also want to understand how to avoid taxes in debt settlement, how debt settlement affects your credit score, and how you can settle debt on your own.
- Debt Management: Debt management is a good form of debt relief if you have the funds available to pay off the debt, you just need help organizing your financial situation. This form of debt relief focuses on budgeting, planning, and organizing. It can be effective for smaller amounts of debt.
- Debt Consolidation: Similar to debt management, debt consolidation can help you better organize your debt. If you owe money to many different creditors and lenders, it can be difficult to keep up with all the payments. Debt consolidation can take all of your debt, and bundle it into one, easy-to-remember payment.
While this isn’t an exhaustive list, it is definitely a good place to start before moving forward with bankruptcy. Information is key when determining your next move. You also want to think about whether or not there is a better alternative to filing for bankruptcy.
If you are wondering whether or not bankruptcy is the right move for you, consider taking the “Should I File For Bankruptcy” Quiz. It can help you understand if bankruptcy would be helpful for you, or if another option may be better. At Ascend, we love helping people understand their debt relief options. If you aren’t sure what the best thing to do is, schedule a call with one of our counselors and we can help!