You know that it’s best to stay out of debt, but sometimes that just isn’t possible. No matter what caused your debt, it can be incredibly stressful to deal with, especially if it keeps piling up. When it gets incredibly severe, you may start to consider filing for bankruptcy. But this is not a get out of jail free card. Filing bankruptcy is a serious decision that will have an impact on your life for the next seven to ten years. So what are some of the reasons to consider bankruptcy?
Incurring Debt to Make Payments
If you are unable to make your monthly payment without drawing on your credit card or other sources of debt, you may be in serious trouble. Additionally, if you are only paying on the interest and not the principal, you aren’t going to make any headway on paying back the money and you are only going to owe more in the long term. Bankruptcy can have a heavy impact for the next seven to ten years, but it may be better than continuing to get deeper into debt and eventually having to declare bankruptcy further down the line.
Facing Foreclosure
Your home is a place of refuge, where you and your family live. If you are facing foreclosure because of your mortgage and you aren’t able to refinance, bankruptcy may be able to save your home. This will depend on what type of bankruptcy you file for and how much you owe. Before you go with this option, make sure you talk to a financial advisor and a lawyer to make sure that this will actually let you keep your home.
Debt Mediation Failed
If you have a large amount of debt from various credit cards or other unsecured loans, it might be helpful to consolidate that debt into one. However, sometimes this doesn’t work or you have secured loans that cannot be consolidated. Like the first section talked about, it does you no good to pay your debts with more debt. This just compounds the interest you are paying and pushes you further into debt. At some point, when you have tried all of your options, you need to give up and declare bankruptcy before it gets worse.
No matter what you decide, bankruptcy is not something you should try to navigate on your own. There are various kinds of bankruptcy, and the one you file for will depend on your specific situation. You will also want to make sure that you have all the paperwork properly filed so you don’t have any difficulties. Don’t be afraid to ask for help.
References:
Debt Mediation
JLT Law
When Should You Consider Bankruptcy?
