When Is It Time To File For Bankruptcy?
Even if you’re struggling financially, you may be trying to avoid bankruptcy at all costs because of the stigma associated with it and the impact on your credit score. However, bankruptcy is a powerful tool that can help turn your finances around if you use it under the right circumstances. Here’s when to file for bankruptcy.
You’re Missing Monthly Payments
If you don’t have enough money to pay your monthly bills or meet minimum credit card payments, you’re effectively already bankrupt. Your credit score is no longer a concern because the past due accounts and collection reports will destroy it on their own.
You Can’t Settle Your Debt
You often have many options to settle a debt or reduce your monthly payments that you should explore before filing for bankruptcy. If you owe taxes or medical bills, you may be able to negotiate a long-term payment plan that fits into your budget. Credit card companies will also often consider a lump sum settlement or payment plan if your account has been closed and they don’t think they have a chance to collect in full.
You’ve Paid Off Debts With a Co-Signer
You should avoid filing for bankruptcy if you have any outstanding debts with a co-signer. Only your personal liability for your debts is discharged in bankruptcy. If you have a co-signer on a debt, they will be responsible for the full outstanding balance of the debt. Depending on the co-signer agreement, the lender may be able to demand immediate payment in full and take legal action against your co-signer if they are unable to pay.
You’re Tired of Dealing With Debt Collectors
Dealing with debt collectors is stressful even when they play by the rules and don’t use harassing tactics. Once you file for bankruptcy, debt collectors must immediately cease collections efforts. If a debt is discharged during bankruptcy, debt collectors are also prohibited by law from trying to restart collections after your bankruptcy is completed.
You’ve Completed Bankruptcy Counseling
Bankruptcy law requires you to complete an educational program about the impact of bankruptcy before you can complete your bankruptcy filing. This helps you to better understand if filing for bankruptcy is right for you, and it allows you to have a more informed conversation with your bankruptcy lawyer.