Bankruptcy is often viewed as a sign of defeat, a white flag weaving on your pile of debt. And while it definitely means admitting defeat, it is by no means the end of your world. In fact, bankruptcy is a process meant to help you start anew by giving you a way to eliminate that debt.
There are many reasons that lead people to unpayable amounts of debt such as hefty medical bills, a divorce, credit card misuse or unpaid student loans. There are even more reasons why you should consider filing for bankruptcy to get rid of that debt. Read on to learn if bankruptcy is the best option you have.
You Meet the Prerequisites
Despite what you might have heard, you may not even be eligible to file for bankruptcy. For example, if you have enough money to repay your creditors you are not eligible for Chapter 7 bankruptcy. This can be easily determined once you’ve filled out the means test required in the process. In general, if you make more than the median income in the state where you’re filing you are likely not eligible for bankruptcy. However, since laws vary from state to state you should consult an experienced bankruptcy lawyer to be sure.
You Won’t Get a Break Anytime Soon
In some cases, large amounts of debt might only be a temporary setback. For example, college graduates might get a well-paid job and workers on a medical leave might get back to their duty and a full paycheck. If your financial situation is likely to improve soon, perhaps you should hold off filing a while longer. But if all seems dire and your finances aren’t likely to improve anytime soon, filing for bankruptcy is a great option.
Your debt is mostly unsecured
What many don’t realize is that bankruptcy won’t help you get rid of all your debt. Bankruptcy can only help eliminate unsecured debt, including medical bills, credit cards, and collections. However, other types of debt like bills, tax debts, student loans and child support cannot be discharged through the process of bankruptcy.
You Know What You’re Facing
No matter what type of debt you’re faced with, bankruptcy might not be the best choice for you. In some cases, bankruptcy can help give people a fresh start, but in others, it can get them even deeper into trouble. That is why you should consult with bankruptcy experts to see how bankruptcy will affect your life.
You’re out of Options
If you don’t have a rich relative you can borrow money from and failed to see any benefits from credit counseling, perhaps you should consider filing. However, it doesn’t hurt to explore all your options before opting in for bankruptcy.
You are Aware It Will Change Your Life
While there’s no reason anyone should feel bad or embarrassed about going into bankruptcy, most people usually feel an emotional impact of the process. Some feel shame, others feel helpless. And while bankruptcy might help you get a fresh start, you should absolutely wait until you are ready and have exhausted all other options.