They ask me a lot of questions: “Should I file bankruptcy? Is it worth it?” And the answer really depends on your circumstances. How in debt are you? Can you afford your payments, is it too tight? Were there any difficulties that put you in this position, such as job loss or medical bills? There are many questions that must be answered before we can determine whether bankruptcy is the right option for you. Let’s cover some of them here.
Reasons why SHOULD Consider filing for bankruptcy:
1) You risk losing your home to foreclosure
If you are at risk of losing your home to foreclosure, filing for bankruptcy and easing your debt burden could be the option you need to keep your home. If you can put more of your income into paying your mortgage than all the other bills you’ve accumulated, you have a better chance of keeping up with your payments. There are several options when filing for bankruptcy that will not put your home in danger; you should consult a bankruptcy attorney for more details.
2) Get protection from creditors
If creditors harass you day and night and no matter what you do, you cannot meet your payments and are threatening to take further action against you, filing for bankruptcy can provide the protection you need.
3) You have high medical bills
Sometimes the unexpected happens and your medical bills quickly spiral out of control. Usually this is not your fault, it is just that the industry is extremely expensive and you may find that recovering from a major accident is impossible.
However, there are times when filing for bankruptcy would be a bad idea. Here are some reasons why SHOULD NOT consider filing for bankruptcy.
1) You can afford to pay your debts
If you have the means to pay your debts, you are simply tired of the bills, you have to buckle up and pay your debts. Filing for bankruptcy has long-term penalties that you cannot consider and should be reserved for one last option, not a “get out of debt” card. Consider talking to a financial or debt counselor or advisor about how to effectively appropriate your funds to better use your money to pay off your debts. You need to focus on your large debt with high interest rates first, as these are costing you the most money.
2) You are concerned about your credit score
If you are facing financial disaster, your credit score should be the last thing on your mind. Recovering and living to fight another day is the first priority. However, there are times when you need to be concerned about this. For example, when you move to a new place to live, the apartment manager or tenant will check your credit. If they see a bankruptcy on your report and a low credit score, they might decide that you are at too high a risk to rent. Also, if you are looking for a new job, employers are now pulling your credit report and will also assume that you are at high risk due to bankruptcy.
3) Your debt problem is the result of your behavior.
If you’ve got into debt due to gambling, overspending, or buying things that you can’t knowingly pay for, you must first fix it yourself before you can fix your debt problem. If you file for bankruptcy without fixing the root of the problem, you will find yourself back in the same position in a year or so. If this is the case, you will find that filing for bankruptcy again is NOT an option. The waiting period is 8 years to file for Chapter 7 bankruptcy after an approved debt discharge. I suggest seeking the guidance of a debt counselor to help fix the problem before filing for bankruptcy.