Should I file
for bankruptcy? This is the first question you need to ask if you have racked
up excessive debt and are wondering if it makes sense to file for bankruptcy
There are pros and cons as to whether it makes sense to file for Chapter 7 bankruptcy, Chapter 13 bankruptcy or simply make the hard choices and necessary changes to avoid bankruptcy
First of all, how does an individual avoid bankruptcy? It is important to avoid increasing your credit debt. Prioritize your life and get rid of the bills you don’t NEED, for example cable TV.
Decide what is most important versus least important. Control your debt and make your payments. But what if you’ve done that already and your debt continues to rise?
Individuals who have buried themselves in excessive debt may eventually have to ask themselves these questions: Should I file for bankruptcy? Does it make sense for me to file for bankruptcy?
Before you declare bankruptcy determine your financial situation. Do an inventory of all your liquid assets, including retirement funds, stocks, bonds, vehicles, and other non-bank account funds.
Next, collect and add up your bills and credit statements. If your assets add up to considerably less than your debt, filing for bankruptcy may be the way to go.
However, when asking yourself “Should I file Bankruptcy?” you must first consider the consequences.
Of course, bankruptcy takes a mental as well as a financial toll. Feelings of failure or of loss may arise and you must be prepared to cope with these feelings. Without coping, these feelings may affect your personal life and important relationships.
Another downfall to filing for bankruptcy is that borrowing money may become difficult or even impossible for up to several years. This may impact your spending habits and make the life you were currently living difficult to manage. Lastly, your credit reports will be impacted and this may actually affect your career.
When you ask the question “Should I file for bankruptcy?” you are also asking yourself “how can bankruptcy be beneficial?”
Let’s say you’ve done all you can trying to negotiate a payment plan with your creditors but they refuse to give you any more time and demand their payment in full. Unfortunately your liabilities exceed your assets and income and it is impossible for you to make the payment.
The only other option is to file for bankruptcy which means you get to start over financially. This can be a huge load off your back mentally as well as financially.
Also, some people are afraid to file for bankruptcy in fear that they might lose the money they’ve accumulated in their IRA’s. Well, good news! In 2005, the Supreme Court stated that bankruptcy protects IRA’s from creditors allowing debtors to hang on to their IRA.
Before considering filing for bankruptcy you should first prioritize your payments. House payments and car payments should be paid before credit card payments. Next, be sure to try all other options, such as negotiating with your creditors and making loan modifications.
Once you eliminate all other options and decide filing for bankruptcy is the road you must take, don’t wait. Do not spend time second guessing yourself all the while just accumulating more debt. Get professional help and take advantage of the fresh start bankruptcy allows.
Ultimately, if you are stressed financially then asking “should I file for bankruptcy” is the first step on your road to financial recovery.