Filing for bankruptcy can be a good thing if done at the right time and in the right way. It can help businesses and individuals to get relief from debts so they can make a fresh financial start. It can help them save money and preserve their peace of mind.
Bankruptcy can also be time-consuming and have a significant effect on an individual's credit score which can affect other aspects of their life such as applying for a job, buying a house or a car. Therefore, bankruptcy should be considered only after all other viable options have been exhausted.
Bankruptcy: Wen To File: Below are some of the reasons or guiding points of when to file for bankruptcy:
1) When you can't find any other means to pay debts
You should only file for bankruptcy when there are no other viable options to pay back your debts. You should consider taking on a second or third job. This will only be for a short period of time but the income realized can help lift you up financially.
2) Consider using a budget
Many people do not use a budget program, hence can't say exactly where their money goes. This way, they can't make appropriate changes that can help them free up more money. Using a budget will put you in a better position to cut down on cost. For example, if the bulk of your expenditure goes to housing, then you can consider downsizing your home or moving to a smaller place. And if transportation cost takes the bulk of your income then you should consider getting a smaller energy efficient car.
However, if you have tried the above and still didn't work out, then this is when to file for bankruptcy
3) If your financial situation is permanent
Before you consider filing for bankruptcy you should assess if your financial situation is temporary or permanent. If you have a financial setback such as the loss of a job, you should consider your prospect of landing another job. If your prospect is good, then you should wait a bit. You should only consider filing for bankruptcy if your financial setback appears to be a more permanent one.
4) If you have exhausted the option or can't negotiate directly with your creditors
Before you consider filing for bankruptcy you should approach your lenders and try renegotiating the terms of your debts. Most lenders will be willing to lower their interest rate or adjust payment plans if you approach them and tell them you are considering filing bankruptcy. In cases of student loan, you may qualify for forbearance or deferment which may suspend payment temporarily.
5) Credit counseling
Before you consider filing for bankruptcy you should try attending a consumer credit counseling. These agencies are specialized at helping clients negotiate with lenders which may help you secure a better deal than if you had tried yourself.
These agencies also assist in creating a realistic budget and will counsel you on if bankruptcy is truly what you should pursue. Attending such counseling programs will inform you on if bankruptcy is your best option or if there are other options that may get you out of your debt.
Other considerations for when to file for bankruptcy includes; if your home is nearing foreclosure if you have a pending lawsuit for negligent bills or taxes.
Bankruptcy When To File
View Larger Map