Believe it or not, bankruptcy isn’t just for rich people. Bankruptcy is one of the most stressful situations in which a person can be placed, and it isn’t always beneficial. Your circumstances are unique, and if you file, then you should make sure that the decision is the best one you can make under those circumstances. So when does it make sense to file for bankruptcy? Here are a few things to keep in mind as you consider the process.
First and foremost, if you think any of the items on this list apply to your situation, then get a bankruptcy lawyer. The first sit-down is almost always free, and it’s a good way to discuss your options before you make any decisions you can’t reverse later on.
Bankruptcy is a second chance, but most people view it as a punishment for those who let themselves fall into extreme debt. Even as you’re enjoying your second chance, it’s not without consequences, both financial and social. Be sure you’re ready to acknowledge and deal with both.
Other life choices may force you down the path to bankruptcy. Divorce is one such reason. If the financial situation after you split from a spouse looks dire, you might need a better option. Other reasons include potential lawsuits from a creditor, foreclosure, or finding yourself with no other choice but to pay bills by withdrawing from a 401(k) or using another credit card. If you can’t afford to eat without spending cold hard cash, then bankruptcy might be your last safe bet.
Before you file for bankruptcy, you should explore other avenues to debt-relief. You might start getting phone calls from organizations promising debt relief, but most are bogus. Anyone looking to profit from your situation isn’t offering a real solution. That said, there are nonprofits out there who may be able to offer you credit counseling services to better manage your debt or cut expenditures more efficiently than you’re doing on your own. If you find that you can’t budget, then it’s time to talk to people who can help.
Once you figure out that you absolutely cannot defeat your debt problems through any other means, try to talk to your creditor or consider programs that will help you negotiate down to a smaller sum. If all else fails, then and only then is it time to consider bankruptcy as a viable option. Be careful of upcoming bills: you won’t want to pay any big ones until you make your big decision.