Is bankruptcy right for me?

There is no easy way to answer the question posed in this headline. Every situation is different and every person has different financial needs and goals that must be considered prior to making any significant decision about debt. However, there are some situations in which bankruptcy is an option that should certainly be explored.

Generally speaking, individuals will either file for Chapter 7 or Chapter 13 bankruptcy when their financial situation becomes unmanageable. It is important to understand that this doesn’t mean that you are going through a hard time or have fallen behind on a bill or two. It means that the repercussions of filing bankruptcy outweigh the consequences of not dealing with debt.

For instance, let’s consider a situation where you have lost your job and are struggling to find a new one. You fall behind on credit card bills, utilities, student loan payments and other financial obligations. If you are in a position where you owe more than you could ever repay, bankruptcy can be an effective way to discharge or reorganize debts.

Another situation in which bankruptcy should be considered is if you have tried other options to resolve your debt but have been unsuccessful. Perhaps you have tried to negotiate with lenders and modify payment plans but they have been unwilling to work with you. Taking legal action and going through the court system can put you in a position to negotiate and seek a discharge of debts even if previous attempts outside of court failed.

Finally, bankruptcy may be a good option for people who want to protect specific assets from being repossessed or liquidated. For instance, if you are at risk of losing your car or home, filing for bankruptcy can put an immediate halt on any efforts to foreclose or repossess your assets.

We want readers to understand that filing for bankruptcy is a decision that should not be made lightly. Discussing your situation, your options and the impact of filing for bankruptcy with your lawyer can be crucial in helping you make a decision that’s right for you.

Source: WiseBread, “3 Times Bankruptcy Is the Right Move,” Dan Rafter, Nov. 9, 2015