In the past, it would have been unthinkable to file for bankruptcy. It just wasn’t something that people did back in the day. Nowadays, it is a lot more common. The statistics suggest that almost one million people filed for bankruptcy in the US alone in 2015. That is a big rise from the seventies and eighties where people avoided it like the plague.
The reason for the increase is that more and more people realize that it is a smart move. Although it doesn’t sound smart, it is smarter than suffocating under a mountain of debt. All you have to do is recognize when the time it right to declare insolvency. If you can do that, you can clear your debts and start afresh. Below are the scenarios which make declaring bankruptcy a good idea.
You Have No Money
You can’t file for bankruptcy until you have no money to pay your creditors. If you have the cash, the government won’t process your appeal. They will tell you that you have the money to make the repayments, and you must deal with it alone. In all honesty, it is a good policy for them to take. If they let everyone take advantage of the system, no one would get paid. For that reason, you have to prove that you are eligible for Chapter 7 bankruptcy. You can call a cheap bankruptcy lawyer right away and talk to them about your options. Often, it is better to discuss it with an expert first to guide you through the process.
Nothing Will Get Better In The Future
There is a case for sticking it out to see if your financial situation gets any better. After all, there are consequences to bankruptcy that will change your life. For one thing, you will never get a loan again without tons of hassle. But, sometimes the present is bleak and the future even bleaker. If it doesn’t look like you can ride out the storm, you will want to take precautionary measures. Filing will allow you to save money as you won’t need to repay your debts and loans. It will take the pressure off your shoulders from an early stage. You just have to make sure that you are making the right decision before you sign on the dotted line.
Debts Are Unsecured
Unsecured debts are essential to your bankruptcy petition. These are the ones that the government and creditors allow you to eliminate. Usually, they consist of credit card charges and medical bills. Think of them as private debts. Secured debts, on the other hand, are different. These are public debts so to speak, the debts you owe the government. Student loans and tax debts are two of the most common examples. These stay with you for life whether you file bankruptcy or go down on your sword. If the majority of your debts are secured, there is no point filing as it won’t make a difference. Debts need to be unsecured for a bankruptcy petition to have any effect.
There Are No Other Options
There are alternative ways to get out of debt. The first and most dangerous is to borrow more money at a lower rate. That isn’t a good idea because you will incur interest. Or, you can figure out a payment plan with your creditors. As long as they start to see some of the money, they will be more flexible with the repayments. After all, they would rather get some of their money back instead of zero. There are even different types of bankruptcy filings. Chapter 13, for instance, lets you pay off your debts while keeping your assets. It is one of the better ways to declare yourself bankrupt. When these aren’t a viable option, you need to consider seriously becoming insolvent.
You’re Comfortable With Your Emotions
No one wants to get emotional, but it is a good idea to consider your feelings towards bankruptcy. There is an emotional side to it because people feel like they have failed. Also, some people hate walking away from their debts because they always take care of their finances. Anyone that is going to feel a swell of emotion after the fact needs to consider seriously it beforehand. There is no point filing if it is going to make you depressed or suicidal. Instead, you are better coming to another arrangement with your creditors. Lots of people don’t bother with this, yet they should if they want to leave it in the past.
You Understand The Downsides
Don’t think of bankruptcy as a positive because it is a negative situation. Okay, you might get a fresh start, but you also get a black mark on your record. For instance, you might have to give up your home to appease creditors. And, you can forget about ever getting a loan again because no lender will trust you because of your history. These downsides are a big deal, and they can affect your life in the long-term. After all, where are you going to live if you don’t have a house? What are you going to do if you ever need to lend money? They are deep questions that you need to answer before you make any decisions. Like everything decision you make, you must understand the pros and cons first.
You Will Learn From Your Mistakes
The good thing about bankruptcy is that you get a factory reboot. The bad thing is that you might not learn from your mistakes. Too many people that are insolvent end up in debt only months after the ink has dried. Obviously, that isn’t a good thing because you will have to go through the process over and over. How many times can you lose a car or your house? People that need to file for bankruptcy should do so only if they will start afresh. Bankruptcy is pointless if you are going to make the same mistakes.
Do you fit the criteria above? If you do, bankruptcy is a viable option.
