Your Finances: When Is Bankruptcy the Answer?

June 8th, 2008 • Related • Filed Under • by tisha

Bankruptcy is a legal resolution to financial difficulties that should only be used as a last resort for getting out from under debt. Because of Bankruptcy Laws, There are consequences that go along with bankruptcy and one should carefully consider such consequences before moving forward. Every individual situation is different for every person and it is up to the individual to determine if bankruptcy is the next logical step.

Bankruptcy is a legal process, handled by an attorney. If you have questions or concerns, the first step you need to take is to schedule a consultation with a bankruptcy attorney who can sort out the facts and myths of bankruptcy relative to your situation. Certain states also have specific rules for bankruptcy, such as the bankruptcy laws california has, so speak to an attorney in your staet. A person who files for bankruptcy without knowing the full list of pros and cons, could find themselves in an even more serious financial situation than they were in previously. A good bankruptcy attorney will also assist you with loss mitigation to help you keep the assets that you can.

From a financial point of view, you need to sit down and figure out how much money you really owe. Make a list of balances and payment amounts along with all sources of your income and calculate the feasibility of successfully making payments each month, while still being able to live a normal, daily life.

In addition to your financial assessment, you also need to consider your mental and emotional situation. If bill collectors are ringing your phone morning, noon, and night and it is all taking a psychological toll on your physical health or your personal relationships, you may find that bankruptcy is the solution to your overall situation. If you find that you have the tolerance and ability to work through your financial situation on your own, keep your health in mind as you work toward your goals.

Bankruptcy does not come without consequences. First of all, it isn’t free and depending on the type of bankruptcy you file, there may still be monthly payments and fees involved. Until you consult with a professional, you can not make a decision about filing. Make sure you understand what can be affected by a bankruptcy filing, not only in the present, but for your future as well. Bankruptcy has a stigma that may affect your future for a time to come. You may no longer have an easy time getting loans, getting a job, procuring insurance, or getting credit potentially for the next 10 years. Because of the lengthy effect of going bankrupt, you can not make this decision lightly.

In addition to consulting with a bankruptcy lawyer, a qualified credit counselor may also help you make the decision about how to handle your debt, They can review your financial records with you and perhaps suggest alternatives to filing bankruptcy, such as helping you create a budget that would allow you to pay the debts on your own. They may even help you work through negotiations with your creditors to settle your debts outright for less than what is owed. You may also seek help from a debt management company or from family and friends who would be willing to lend you money to get you back on your feet.