I get this question a lot, “Should I even file for bankruptcy? Is it worth it?” and the answer truly depends on your circumstances. How far in debt are you? Can you afford your payments, it’s just really tight? Was there a hardship that occurred that put you into this position such as a loss of job or medical bills? There are a lot of questions that need to be answered before we can determine if bankruptcy is the right option for you. Let’s cover a few of them here.
Reasons you SHOULD consider filing for Bankruptcy:
1) You are at risk of losing your home to foreclosure
If you are at risk of losing your home to foreclosure, filing for bankruptcy and easing the burden of debt might be the option you need to keep your home. If you can put more of your income towards paying your mortgage than on all the other bills you have accumulated, you have a greater chance of staying current on your payments. There are several options when filing bankruptcy that won’t put your home at jeopardy, you should consult a bankruptcy attorney for specifics on this.
2) Get protection from Creditors
If you are being hounded day and night by creditors and no matter what you do, you can’t keep up with your payments and they are threatening further action against you, filing for bankruptcy can gain you the protection you need.
3) You have Large Medical Bills
Sometimes the unexpected happens and your medical bills get out of control quick. This usually is of no fault of your own, it’s just the industry is extremely expensive and you can find that recovering from a major accident is impossible.
However, there are times when filing for bankruptcy would be a bad idea. Here are a few reasons that you SHOULD NOT consider filing bankruptcy.
1) You can afford to pay off your debts
If you have the means to pay off your debts, you are just tired of the bills, you should buckle down and pay off your debts. Filing bankruptcy has long-term penalties that you may not consider and should be reserved for a last option, not a “get out of debt free” card. Consider speaking with a debt or financial counselor or advisor on how to appropriate your funds effectively to best use your money to pay off your debts. You should focus on your large high interest rate debts first, as these are costing you the most money.
2) You are worried 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 instance, when moving to a new place to live, the apartment manager or renter will check your credit. If they see a bankruptcy on your report and a low credit score, they might decide that you are too high risk to rent to. Also, if you are looking for a new job, employers are now pulling your credit report and will also make the same assumption that you are high risk due to your bankruptcy.
3) Your debt problem is the result of your behavior
If you have found yourself in debt due to gambling, overspending, or buying things you can’t knowingly afford, you first need to fix 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 matter of 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 issue before seeking bankruptcy.