When to file for bankruptcy

Running out of options? If you’re patient, bankruptcy could be your answer.

Bankruptcy is only a last resort

Yikes! So you’ve got yourself in a bit of a pickle, eh? You owe thousands of dollars in credit card debt, you’re 3 months late on your mortgage and you’re starting to feel the pressure. It could be time to think about bankruptcy, right? Wrong! The first rule of declaring for bankruptcy is that it should only be used as a last resort, meaning you shouldn’t even consider the option except for very rare instances. Being in debt is a normal part of life. Most people simply can’t afford to throw down $250,000 on a house or $20,000 on a new car. So they use credit as a means of attaining these things. But things do come up in life and paying back credit isn’t always easy. Health situations arise. Your son needs braces. The hot water heater breaks. These are all expensive but require your attention. They may also compromise that $200 credit card bill or your car payment for next month. But that doesn’t mean you should think about declaring for bankruptcy. Only use it in extreme cases!

Some special cases when bankruptcy can help

While bankruptcy is not the best way to resolve your debts, there are times in your life when you’ll be glad that this option is your right as an American citizen. At times, things like medical bills may take precedent over how your credit report looks. A divorce may hit you suddenly and force you to essentially lose half of your family’s income. Or, credit card debt may just be absolutely inescapable. At these times in your life, you should speak with a credit counselor who can help you to decide if bankruptcy might be your best option as a last resort. You will be essentially sacrificing a portion of your life (after you’ve declared bankruptcy, it is recorded on your credit report for up to 10 years, meaning you could be denied credit on a home or car or even get turned down for a job because of it) so be sure to think about your decision deeply.

If all else fails…

If you’ve tried counseling, learned about consolidation and even tried to alter your life to allow you to pay off your bills, you may have no other choice but to declare for bankruptcy. By declaring for bankruptcy, many of your debts will be forgiven, some for pennies on the dollar, others completely. But you will have to sell off many items you own in order to pay off some of the debt. But, remember, there are other options before bankruptcy. It’s important for you to not act on pure emotion when making a large decision like this, so be sure to consider every other option possible before declaring bankruptcy. You’ll be glad you did.