Three Reasons Why Filing Bankruptcy Might Make Sense For Your Situation

 If you’re in debt and are considering bankruptcy as an option for you to get needed relief, perhaps just hearing the word “bankruptcy” makes you extremely nervous. Maybe the word conjures up images in your mind of losing everything you have and not having a financial future.
Relax. It’s not what you think. Regardless of what you may have heard about bankruptcy, it is really nothing more than a petition that you file with the court in order to get relief from debts that you can no longer pay.
Bankruptcy can be likened to a needed surgery. It’s something that you dread doing but it may be exactly what you need to get better.
A lot of people who need it can already see the writing on the wall but they just have a thousand questions racing through their mind: Is it for me? How do I know it’s not just going to make my financial situation worse? Are there other alternatives?
Well, here are 4 situations that may tell you if you are on the right path:
1. You can no longer afford to make your monthly debt payments. If you are always late in making your debt payments and you are forced to borrow even more just to pay other debts, this is a serious sign of financial trouble. To get out of debt, you need to stop borrowing, period. That should be obvious. Otherwise, the financial hole you’re in just keeps getting bigger and deeper every month.
2. Your income is not sufficient to even pay for living expenses, let alone pay your debts. You know you’re in trouble if you have to choose between paying rent or your credit cards this month. If you have suffered a loss of income and can’t even cover basic necessities such as rent, food, utilities, etc., the question is whether or not you’d be able to replace the lost income right away in order to avoid defaulting on your debts. Unfortunately, most people live paycheck to paycheck and do not have any savings. If your current situation is likely to continue for an extended period of time, you may end up depleting all your financial resources (savings, retirement plans, etc.) and end up filing bankruptcy, anyway.
3. Your credit is already damaged. A lot of people consulting with me about bankruptcy often ask about the negative impact that filing may have on their credit. That’s understandable especially if maintaining a good credit rating is important to you. But if your credit is already damaged due to late payments, repos, foreclosure, lawsuits or judgments, what “credit” are you really trying to protect? Filing bankruptcy may actually help you re-establish credit much faster (usually only 2-3 years after a Chapter 7, for example) instead of having a lot of collection accounts on your record. Remember that as long as you do not pay creditors, they will continue to report you month after month to the credit bureaus, making it difficult to rebuild your credit.
There may be reasons other than the above scenarios which make filing bankruptcy the best option in getting out of debt. Before going down this road, of course, you need to know the pros and cons for your individual situation so that you can make an informed decision.
Ray J. Bulaon is a bankruptcy and tax problem resolution attorney in Valencia who has helped more than 5,000 clients. For a free confidential consultation, call his Valencia office at 866-477-7772.