Should I File Bankruptcy?
Several news stories have tackled this question about when a consumer should consider bankruptcy. In addition to the Newsweek piece that attracted lots of attention, today's New York Times Cost of Living column by M.P. Dunleavey is entitled "Bankruptcy as a Step to Solvency." The column tackles some of the concerns that people may weigh in deciding whether they need bankruptcy, and if so, whether now is the right time to file, including the effect of bankruptcy on credit, the ability to preserve assets, and other strategies such as dipping into retirement accounts to pay debts. Judge Bruce Markell recently came across a "rule of thumb" book that advised that people should consider bankruptcy if it would take more than five years to pay off your debts or you would have to use assets to do so. (Note: the Judge has no position/comment on the appropriateness/usefulness of such a rule). Many of our Credit Slips readers help clients answer this question about whether they need bankruptcy every day, and most of us have had to counsel friends or family about bankruptcy. What is your rule of thumb, if you have one? What is the "last straw" tactic that you think families should avoid and file bankruptcy instead?