Is Bankruptcy a Good Solution for Me?

05
March

The decision to file bankruptcy is a tough one. On one hand, you’re eager to get rid of your high balances and start fresh. But on the other hand, you fear being judged by your peers and you don’t want to face the aftermath. There are serious consequences to bankruptcy, such as a reduced credit score. And whether it’s fair or not, there’s also a little stigma associated with bankruptcy. People who learn of your filing might question your level of responsibility or feel that you took the “easy way out.” However, the decision to file a bankruptcy petition is a personal one and you have to live with the consequences. You shouldn’t let others sway your decision. Instead, take an honest look at your situation and decide for yourself if bankruptcy is the best solution.

Personal Income

Your amount of disposable income impacts your decision to file bankruptcy. Even if you have good intentions and want to repay your debts, the fact that you earn a low wage or don’t have extra income will hinder your efforts. Getting out of debt involves more than paying your minimum. This often requires a significant amount of extra income to knock down your balances. If you’re already behind on your payments and you don’t foresee any immediate changes in your income, bankruptcy might be the solution to your problems.

Future Plans

Filing bankruptcy mars your credit report for up to 10 years. This translate into possible credit and loan rejections, as well as higher interest rates on your credit accounts. What do you hope to accomplish within the next few years? Do you want to buy a house or finance a vehicle? Understand the ramifications of filing. Having a bankruptcy in your past doesn’t stop loan approvals, but there is a waiting period for new lines of credit — typically two years. A bankruptcy can work if there isn’t an immediate need for a loan or line of credit.

Debt Settlement

Explore the option of debt settlement before meeting with an attorney to file your bankruptcy papers. Settlement agreements between you and your creditor authorizes you to pay less than you owe. Some creditors settle accounts for 30 to 50 percent of the actual balance. A settlement can damage your credit score, but the damage is far less than the damage caused by a bankruptcy. In addition, you can reestablish your credit score faster with a settlement.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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