Who should file a bankruptcy?
Declaring bankruptcy when you are neck deep in debt and think you cannot afford to pay back, sounds very tempting. Filing bankruptcy may not be as easy as it sounds to be. Hence, it is important that you have a clear idea about why and when you should file bankruptcy and if at all you should file one. Ask yourself “Should I file bankruptcy?” Analyze your situation in details before you take such a crucial step.
You may have your own reasons to file a bankruptcy, but there are common reasons when you have this question in mind.
Are there options to avoid bankruptcy?
Yes, before you file bankruptcy, you must consider other probable options. The options are given below.
- Loan modification may be a better option than bankruptcy. However, if your creditors are unwilling to modify your loan and you see no way out to pay them (or him) back, you may file a bankruptcy.
- If your monthly payments on debts become more than what you earn each month, you may opt for bankruptcy. Chapter 7 bankruptcy helps you get rid of unsecured debts. This may also be a reason why you would like to file a bankruptcy.
- It is a good idea to calculate the total debt you owe (excluding mortgage and your car loan) and see if the amount is higher than what you can practically afford to pay back in the next 5 or 6 years. If it is, you may file for bankruptcy.
- Bankruptcy can immediately stop harassing calls from creditors, but this may not be a good reason. If you see your creditors are charging you more than what you can afford and they are not agreeing to reduce the payoff amount, bankruptcy makes sense.
- Individuals who do not have any kind of savings and have huge amount of loans to pay back may find bankruptcy an easy and viable option.
- Bankruptcy filing puts an automatic stop to foreclosure and repossession. In case you feel bankruptcy is the last step you must take to avoid foreclosure and repossession, you may file for one.
Bankruptcy may save you from a lot of tough situations, but at the same time it is a life changing event. Bankruptcy has long term effects on your life. You may be refused further applications for loan for a certain period of time, if you have a bankruptcy in your credit reports. Bankruptcy stays on your credit reports for about 7 to 10 years. This information may be used by lenders when you apply for a loan.
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