When debating whether or not to declare bankruptcy, consider the following. Evaluate your ability to pay off your obligations in fewer than five years. If you answered no, it might be time to declare bankruptcy because life is about Press The Restart Button.
The reasoning behind this is that the purpose of the bankruptcy code is to provide individuals with a fresh start, not to condemn them to permanent financial ruin. If bankruptcy seems like your only option if you’ve been financially destroyed by a combination of terrible luck and bad decisions and don’t see that changing in the next five years, then maybe it is.
Even if you don’t fulfil the requirements for filing for bankruptcy, you still have options for getting out from under your debt. There are numerous realistic solutions available, including debt consolidation loans, credit counselling, and debt settlement. Every solution requires a commitment of at least two years, and none of them can guarantee that your financial obligations will be cleared by the end of the process.
Chapter 7 bankruptcy can be filed and processed in as little as four to six months, but the timing shouldn’t be a deciding factor. Keep in mind that filing for bankruptcy has severe long-term repercussions. For 7-10 years, it will remain on your credit report, making it harder to obtain credit in the future.
On the other hand, having your debts written off and starting again can provide a significant emotional and psychological boost.
Waiting to file for bankruptcy “may sometimes assist a person or organization manage cash-flow in the short term, which offers breathing room to survive over the medium or longer term without filing for bankruptcy,” said Reischer.
Since filing for bankruptcy has far-reaching and serious thetotal consequences, an individual or company should explore other options, such as looking for short-term loans. Declaring bankruptcy should only be done when all other options have been exhausted.
For What Reason Should You File For Bankruptcy
Filing for bankruptcy is a last resort after exhausting all other possibilities to get out of what may feel like financial quicksand. You’ve probably reached the end of your resources and realize bankruptcy is your only option.
Do Not Lose Hope
Keep in mind that you have company. Insolvency can result from factors beyond one’s control, such as unexpected expenses or poor timing.
In addition to the emotional and psychological toll, a divorce can have a devastating financial impact.
Mounting Medical Costs
A study published in the American Journal of Public Health in 2019 found that medical bills major contributors to bankruptcy.
Misguided Choices With Money
One of the most common causes of bankruptcy is the inability to control one’s credit card spending, which can be a symptom of larger budgeting problems.
A Lost Job
Many people don’t save enough to cover unexpected expenses, so losing a job can be like opening a floodgate to mounting debt.
Natural calamities, manufactured disasters, and the like can all lead to property loss or theft. A financial emergency might be disastrous when you’re barely getting by.
For the millions who have lost their livelihoods due to the coronavirus, bankruptcy offers a glimmer of hope. However, they still had debts to pay and, in many cases, no means. Bankruptcy was created specifically to solve such situations. This is not a rescue plan. It was designed to help people get their lives back on track monetarily and emotionally.
Bankruptcy is a secure, legal, and practical option if your debts have accumulated to an amount you cannot pay off.
According to Morgan, “you want to make sure you pick the correct time to file.” For many people, filing for bankruptcy is their only way out of debt collection actions, including foreclosure and wage garnishment. For this reason, the decision of when to file might be a difficult one at times.
If you don’t fit neatly into any of those categories, it’s time to take stock of your circumstances. It may not be the best moment to file for bankruptcy if you live over your means on credit because your income is insufficient. Once a person has filed for bankruptcy, they often aren’t issued any new large credit lines for quite some time.