Declaring bankruptcy can be a hard decision to make for many people. On the one hand, it may seem like admitting defeat in your financial life. It will damage your credit, make it hard to get loans or to buy a house, and a myriad of other problems. On the other hand, it can seem like the way to solve all your problems. Depending on the kind of bankruptcy you file, you can potentially erase all your debts, start over, and eventually build back up your financial credibility.
When you’re considering bankruptcy, make sure to look at the following criteria. If you’re unsure about what course of action to take, then try getting in touch with a lawyer and seeing what they would suggest. Many lawyers give free initial consultations with people to help them decide if they need to declare bankruptcy or not, and if they don’t think bankruptcy is right for you, they may be able to suggest a more suitable alternative such as debt consolidation.
How Bad is it Really?
Bankruptcy is only for those who feel that, realistically, they will never be able to pay off all of the debt they have accumulated. For those who may just need more time, a better payment plan, or to simply tighten their belt for a couple of years while they buckle down and pay off their debts, another course of action such as debt consolidation could be a better option. Remember that something like bankruptcy can affect your finances for the rest of your life, so keep your mind open to other alternatives.
Do You Understand the Consequences?
Some people think that bankruptcy is simply a cure all for their financial problems, and neglect to acknowledge the fact that it can have lasting ramifications on their life. Bankruptcy can affect not only your credit, but your ability to do all sorts of other things, like borrowing, signing any contracts that involve payments (like leases!), or even destroy your IRA. You are not even guaranteed that all debts will be discharged – there are some which you may still be held responsible for. Make sure you understand all the impacts that declaring bankruptcy will have on your life. Once you have all this information, it is probably best to speak with a lawyer to ensure that you know exactly what will happen. If you conclude that bankruptcy is the only way, and the benefits outweigh the consequences, then you can proceed.
What Kind of Bankruptcy Are You Eligible For?
Whether or not you want to declare bankruptcy may depend on the kind of bankruptcy you are allowed to file. Chapter 7, Chapter 11, and Chapter 13 bankruptcy all have different qualifications, and all have different results. For instance, Chapter 7 bankruptcy tends to discharge most of your debts, but there are financial requirements, such as the amount of money you make per year, to be able to file for Chapter 7. If you’re not eligible for this, then your debts may not be