Should I File for Bankruptcy? A Comprehensive Guide to Making the Right Decision

If you’re drowning in debt, constantly dodging creditor calls, or wondering how to pay your bills, you might be asking yourself, should I file for bankruptcy? This is a common question, especially as bankruptcy filings have risen 11.5% over the previous year, with non-business filings up 11.8% as of June 2025. Bankruptcy Filings Rise 11.5 Percent Over Previous Year — U.S. Courts (Published July 31, 2025)

With economic pressures like inflation and job instability, more people are turning to bankruptcy as a potential solution. But is it the right choice for you?

As an experienced bankruptcy attorney, I often guide clients through this tough decision. Filing for bankruptcy isn’t a one-size-fits-all answer—it’s a legal tool that can provide relief now but comes with some long-term impacts. In this post, we’ll explore the pros and cons of filing bankruptcy, signs it’s time to consider it, alternatives, and when to seek professional advice. Remember, this is general information, not personalized legal advice. Consult a qualified bankruptcy lawyer to evaluate your situation.

What Is Bankruptcy and How Does It Work?

Bankruptcy is a federal legal process that helps individuals and businesses eliminate or restructure overwhelming debt. When you file, it triggers an “automatic stay,” halting most collection activities, lawsuits, and wage garnishments immediately.

There are two main types for individuals:

• Chapter 7 Bankruptcy: Often called “liquidation” bankruptcy, it wipes out unsecured debts like credit cards and medical bills. Non-exempt assets may be sold to pay creditors, but most people keep their essentials (e.g., home equity up to exemption limits).
• Chapter 13 Bankruptcy: A “reorganization” plan where you repay some or all debts over 3-5 years, ideal if you have steady income or want to protect assets like a home from foreclosure.

The choice between Chapter 7 and Chapter 13 depends on your income, assets, and debt type. For instance, if your income is below your state’s median, you may qualify for Chapter 7.

Signs You Should Consider Filing for Bankruptcy

Not everyone needs to file, but certain red flags suggest it’s worth exploring:

• Unmanageable Debt: If minimum payments exceed 50% of your income or you’re only paying interest without reducing principal.
• Harassment from Creditors: Constant calls, threats, or lawsuits from debt collectors.
• Maxed-Out Credit Cards: High balances with no repayment plan in sight.
• Foreclosure or Repossession Threats: You’re at risk of losing your home or car.
• Medical or Job Loss Debt: Unexpected expenses that spiraled out of control.

You are not alone. In 2025, individual Chapter 7 filings have climbed 15% in the first half of the year alone, reflecting broader financial strain. Total Bankruptcy Filings Increased 10 Percent in the First Half of 2025 — Epiq Global

If these signs resonate, bankruptcy could offer a fresh start—but let’s weigh the benefits and drawbacks first.

Pros of Filing for Bankruptcy

Filing bankruptcy has clear advantages, especially if debt is ruining your life. Here are the key pros:

1. Immediate Relief from Creditors: The automatic stay stops all collection efforts, giving you breathing room to regroup. Bankruptcy: How It Works, Types, and Consequences — Experian
2. Debt Discharge: Unsecured debts like credit cards, personal loans, and medical bills can be wiped out entirely in Chapter 7, potentially eliminating tens of thousands in obligations.Pros and Cons of Filing Bankruptcy — Debt.org
3. Fresh Financial Start: It allows you to rebuild without the weight of past debts, often leading to better financial habits long-term.
4. Potential Credit Improvement: If your score is already low due to delinquencies, bankruptcy can stabilize it faster than ongoing defaults. Scores can rebound to 700+ within 1-2 years with responsible behavior.Pros and Cons of Filing for Bankruptcy — LendingTree
5. Asset Protection: Exemptions shield essentials like your home (up to certain equity limits), car, retirement accounts, and personal items.

For many, these pros mean peace of mind and a path to financial stability.

Cons of Filing for Bankruptcy

While beneficial, bankruptcy isn’t without downsides. Consider these before deciding:

1. Credit Score Impact: Your score could drop 100-200 points initially and stay on your report for 10 years. Loans may be harder short-term but the impact quickly diminishes.
2. Asset Loss: In Chapter 7, non-exempt property (e.g., luxury items or second homes) could be sold.
3. No Discharge for All Debts: Student loans, child support, recent taxes, and secured debts (like mortgages) often survive bankruptcy.Bankruptcy — WashingtonLawHelp.org
4. Filing Fees and Costs: Court fees start at $300-$400, plus attorney fees ($2,000-$3,500 typically). It’s not “inexpensive bankruptcy,” despite searches for affordable options.
5. Emotional and Social Stigma: Some feel shame, though it’s a common tool—over 400,000 non-business filings occurred in the year ending June 2025. Bankruptcy Filings Rise 11.5 Percent Over Previous Year — U.S. Courts (Published July 31, 2025). Think of it as a business decision.

Chapter 7 vs. Chapter 13: Which Is Right for You?

• Chapter 7: Best for low-income filers with mostly unsecured debt. Process takes 4-6 months; most debts discharged.
• Chapter 13: Suited for higher earners or those with assets to protect. Requires a repayment plan but lets you catch up on mortgages.

Alternatives to Filing Bankruptcy

Before jumping to bankruptcy, explore these options. They might resolve your debt without the long-term credit hit:

1. Credit Counseling: Non-profit agencies review your finances and create a budget. It’s required pre-bankruptcy anyway and often free or low-cost.
2. Debt Consolidation: Combine debts into one loan with lower interest. Good if you have decent credit; reduces monthly payments. Personal Bankruptcy Inquiries Surging? Alternatives to Consider Now — CBS News
3. Debt Management Plan (DMP): Through counseling, negotiate lower rates and fixed payments. Takes 3-5 years but avoids bankruptcy.
4. Debt Settlement: Negotiate to pay a lump sum less than owed. Risky—can damage credit and trigger taxes on forgiven debt—but cheaper than full repayment. Alternatives to Bankruptcy — AF Morgan Law
5. Negotiate Directly with Creditors: Many accept hardship plans or reduced settlements. Or, build a strict budget and emergency fund to pay down debt organically. Here’s your clickable link: Alternatives to Bankruptcy — TexasLawHelp.org
6. Balance Transfer Cards: For smaller debts, transfer to 0% APR cards temporarily.

Our office can help you with debt settlement and direct negotiation with creditors, alternatives to bankruptcy. These alternatives work best for manageable debt and a good source of income or asset. If creditors are suing or garnishing wages, bankruptcy might be unavoidable.

When Should You Consult a Bankruptcy Attorney?

You shouldn’t decide alone—should I file for bankruptcy? It is too complex for DIY. A bankruptcy lawyer can:

• Assess eligibility and exemptions.
• Maximize debt discharge.
• Navigate paperwork to avoid denial.

With filings surging in 2025, experienced attorneys are busier, so act soon. July US Corporate Bankruptcy Filings Hit Highest Monthly Total in 5 Years — S&P Global

Final Thoughts: Is Bankruptcy Right for You?

Deciding should I file for bankruptcy boils down to your financial picture. If debt is insurmountable and alternatives fail, it can provide the relief you need. But with rising filings in 2025, it’s clear many are facing similar struggles— you’re not alone.

At LONG & LONG P.C. we specialize in helping clients like you explore options, from alternatives to bankruptcy to full Chapter 7 or 13 filings. Take the first step toward financial freedom—call now at 303-832-2655 or use our website contact link to schedule your free consultation. What Is Bankruptcy? A Complete Guide to Understanding Your Options

Disclaimer: This post is for informational purposes only and not legal advice. Bankruptcy laws vary by state and situation.