The general consensus is that to declare bankruptcy is a last resort, only as a final resort after you have exhausted all other possible debt relief solutions. Yet, at times it can be difficult to determine when you have run out of other options. Your decisions basically boil down to the current financial state, which includes your assets, debts, income, and monthly expenses.
When you have run out of viable financial alternatives, bankruptcy becomes an appealing option. This is particularly the case if you are struggling to meet minimum payments on your mortgage or rent. Declaring bankruptcy can help you get rid of all your outstanding debt, together with late fees and penalties. However, it has serious drawbacks, such as a marked decrease in your credit score, removal of your tax benefits, and a stigma that remain on your financial records for ten years. Furthermore, bankruptcy may affect your future ability to secure lower rates on loans or credit cards.
There are some instances when bankruptcy chapters are appropriate for debt relief. For instance, if you have substantial medical expenses, yet you have made timely payments on other accounts, you may qualify for a medical debt relief chapter. On the other hand, if you have seriously considered bankruptcy, but are still in need of debt relief, you may qualify for a debt relief chapter to implement prompt repayment.
However, when to declare bankruptcy is another question. It is best to consult with an experienced bankruptcy lawyer who can assist you in weighing your options before you make this important financial decision. If you have other options available, but have decided to file for bankruptcy, do not wait until your bankruptcy petition is approved. Instead, act quickly to seek advice from an experienced bankruptcy attorney so you can prevent further consequences, such as increased interest rates and the potential of being placed on public credit listing services.
Once you have decided to declare bankruptcy, you must also consider how much debt you actually owe. Some people will underestimate their total debts and deem it too high to file. However, even people with good track records when it comes to paying their bills, do not always know how much they owe, especially if they have overused or misused credit cards. Also, if you are no longer earning money and relying on a pension or social security to support you, your debt to income ratio may be too high. You should consult with an expert in bankruptcy law to assess your situation to ensure you are financially fit to file.
Unfortunately, not everyone can be declared bankrupt. Before you decide if this is the right course of action for you, consult an experienced bankruptcy attorney to help you assess your financial position. They can inform you whether you will be discharged from your obligation to pay, or whether you only need to pay a small amount to get out of the debt. Depending on the type of petition filed, some creditors may still be able to recover their debt from you after a period of time has gone by. However, the odds of that happening are low, therefore it may be best to consult with an attorney before making the decision to file for bankruptcy.