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The Washington Independent
The Washington Independent

When Should You File For Bankruptcy?

When Should You File For Bankruptcy?

Filing for bankruptcy is a life-changing decision. It can positively change your life by removing pressures that may have been dragging you down. But it can also negatively change your life by adding new struggles that may make your future more complicated.

Adaline Fritz
Jan 12, 2022

Table of Contents

Filing for bankruptcy is a life-changing decision. It can positively change your life by removing pressures that may have been dragging you down. But it can also negatively change your life by adding new struggles that may make your future more complicated.

For these reasons, it’s essential to take this decision very seriously. If you are considering filing for bankruptcy, you should do all the research you can before committing to it.

What is filing for bankruptcy?

If you find yourself in overwhelming levels of debt, filing for bankruptcy might be a strategy you take to fix this. Bankruptcy is something you apply for when you can’t pay your debts. It is a legal order that relieves you from some or all of your debts.

You can also be made bankrupt without applying yourself. This happens when one of your creditors asks a court to make you bankrupt. They can do this once you pass a threshold of money you owe. This threshold will vary, depending on where you live. If you have been made bankrupt against your own will, you may feel afraid of the consequences. However, as you will read in this article, there are some positives to going bankrupt.

There are some alternatives to filing for bankruptcy. For example, you can seek debt relief or apply for an individual voluntary arrangement. It is wise to discuss your options with a bankruptcy attorney before making your decision.

What are the disadvantages of bankruptcy?


Often, going bankrupt will require a single payment. Depending on your location, this fee can range. Those going bankrupt often do not have spare money, so this fee can sometimes be prohibiting.


Bankruptcy significantly affects your credit rating. For six years, your credit rating will be damaged. For this reason, you will struggle to take out loans or other forms of credit. In addition, if you try to take out a larger loan (this threshold will depend on your location), you have to declare your bankruptcy to the lender, or you will be committing a crime.


Your housing can be affected by filing for bankruptcy. Your landlord is allowed to end your tenancy if you are bankrupt, and if you live in a house you own, it may have to be sold. Whether or not it is sold chiefly depends on its value after any amounts secured on it are repaid.

Items in the house and your broader life might also have to be sold. Their sale depends on whether they are ‘exempt goods’ or not. Exempt goods include clothing, bedding, and furniture. A good is exempt if it is necessary for basic domestic needs.


Despite filing for bankruptcy, if your income is above a certain threshold, you may be asked to make payments towards your debts for three years. Therefore, considering your income when applying for bankruptcy is essential.

What are the advantages of bankruptcy?

Removed pressure

When you go bankrupt, you no longer have to repay your creditors (unless your income is over a threshold, as aforementioned). In addition, your creditors have to stop bringing court action against you to repay their money once you have declared bankruptcy.


You are allowed to keep some of your income (though less than usual), so you can live a somewhat regular life still after declaration. As mentioned before, you still have access to some exempt goods, so your life doesn’t have to be completely upturned.


The payment towards your debts mentioned in the disadvantages section may make you worried about applying for bankruptcy. But it’s important to note that this won’t apply to you if your income comes from welfare benefits. Plus, if you have to make contributions, it is only for three years. Once the three years have passed, you won’t be required to make any financial contributions.

How do you apply for bankruptcy?

file for bankruptcy

Now you’ve read about what bankruptcy is, as well as its advantages and disadvantages; you may be wondering how to make it happen. While you should talk to a professional before making any big decisions, outlined here is a short timeline for filing for bankruptcy.

The process will depend, location to location, but this can give you a vague idea of some of the critical points you will have to go through.

Fill out the form

Once you’ve decided bankruptcy is the right strategy for you, you need to fill out the bankruptcy form and pay the fee that comes with it. These forms are often found online, and payment can also be made online. If you’d prefer, the form should tell you some banks you can visit to make the payment in person.

Withdraw money

When you file for bankruptcy, your accounts will be frozen. The time this takes will vary, so it’s smart to take out some money for living costs as soon as possible.

Submit your application

When you submit your application, you will be asked to verify that you are the person you’ve stated on the form and that everything you’ve provided is accurate. You mustn’t lie on the form, as this is a criminal offense that could result in fines or a prison term.

Wait for a decision

An adjudicator has the power to either grant or reject your application. This decision will have a time limit on it. In some places, adjudicators have 28 days to respond. You may be contacted if the adjudicator feels they need more information about your situation.

If they reject you, you can appeal the decision. If they accept you, you are officially declared bankrupt, and your money and property will become controlled by an official receiver. You will meet with this person to discuss your bankruptcy, and they will move through the process with you by taking charge of what happens to your assets.

Should you file for bankruptcy?

As you can see, filing for bankruptcy can upend your life. It is not a decision to be taken lightly, so get as much advice as you can before making your choice.

Adaline Fritz | Adaline's upbeat, can-do attitude and nurturing disposition make her perfect for understanding each client's wants and needs and skillfully directing them toward their real estate objectives. Adaline has experience in all facets of the real estate process, having started in the administrative sector and progressed to operations before achieving success in real estate sales. She earned a Bachelor of Science degree in Psychology from San Diego State University and Western Oregon University, and returned to the Portland area in 2011 to pursue a career in real estate. She also loves traveling, working out, and spending time on the water during Portland's beautiful summers.


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