Is Bankruptcy The Best Option?

ROSELAND – While bankruptcy offers both individuals and businesses financial protection, it’s not a cure-all, advises the New Jersey Society of Certified Public Accountants.

“It does offer a fresh start,” says Kenneth J. DeGraw, CPA, of WithumSmith+Brown. “But you need to enter the process with your eyes open and should discuss the ramifications of this drastic step with family, legal council and your financial advisor.”


Before you file for bankruptcy, there are some proactive steps you can take. Speak with a financial professional; get some insight from a bankruptcy counselor; and talk to your lender about renegotiating obligations. It’s important to take a fresh look at what caused the problem and be realistic with your financial situation.

One major benefit of bankruptcy is that the day you do file, there is an automatic stay where creditor claims and litigation against you comes to a halt. However, there are certain claims that continue to remain in force, including certain taxes, student loans, property settlements, domestic support and criminal restitution.

The most common types of bankruptcy for businesses and individuals are Chapter 7 and Chapter 13. Chapter 7 involves turning over your assets to a trustee who then liquidates those assets to pay creditors. Chapter 13 involves crafting a plan to pay creditors in whole or in part over a certain period of time, usually 3-5 years.

In addition to filing fees that can top $1,000, bankruptcy can affect your ability to get future financing and can remain on your credit report for up to 10 years. Keep in mind, too, that there can be tax ramifications for forgiveness of debt.

Technically, you don’t need an attorney to file for bankruptcy. However, DeGraw doesn’t recommend this approach. “Because you are dealing with federal law, it’s definitely not to be entered into lightly. You should speak with an attorney and a financial advisor to help negotiate the many nuances involved.”

Visit to listen to “Is Bankruptcy the Best Option” or one of the NJSCPA’s many other convenient audio presentations.

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