Some Oregon consumers might be struggling with debt but may hesitate to file for bankruptcy. Many people may feel it is more honorable to pay debts and that filing for bankruptcy will stigmatize them. However, bankruptcy is a tool that is intended to offer people a fresh start. Many experts say waiting to file leaves people financially depleted and less able to take advantage of the benefits.

A study from the Notre Dame Law Review identified “long strugglers” as people who went two years or longer forgoing basic necessities and struggling with asset depletion and lawsuits rather than filing for bankruptcy. Some people spent five years or more in this position. Compared to those who filed bankruptcy before this two-year mark, they had half as many median assets. They had a 40 percent higher debt-to-income ratio than other debtors, and about half faced debt collection lawsuits compared to just over one-third of other debtors.

People whose debts are over 40 percent of their income, who are using debt to pay off other debts or who are giving up essentials in an effort to pay debt may be good candidates for bankruptcy. Most court judgments and student loan debts cannot be discharged in bankruptcy although medical and credit card debt can be. The main types of bankruptcy for individuals are Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy is generally for people who cannot pay back anything to their creditors. With a Chapter 13 bankruptcy, a person may be able to keep a home and some other assets. Filing for bankruptcy puts an immediate stop to creditor actions including foreclosure on the home. Chapter 13 involves working out a payment plan with creditors over a period of three or five years. The plan must be approved by the court.