In What Situations Should You File For Bankruptcy?

Bankruptcy is a legal process that allows you to get a financial fresh start when you are running into trouble. However, bankruptcy should not be taken lightly. Many people compare it to getting a divorce, where you should only use it when you've run out of options and it's the only way to make things right. This may leave you wondering what situations are appropriate to choose bankruptcy since it can have a huge impact on your finances that will last for years to come.

You're Drowning In Debt

Many people turn to bankruptcy when they are drowning in so much debt that there is no possible way to get out of it. Drowning in debt could mean that the interest that you are paying is more than the amount of money that you can apply to the debt every single month. It's not easy to start earning more money, especially when you are constantly trying to dig yourself out of a hole that gets deeper and deeper. Bankruptcy will help eliminate many of those debts and discharge them for good. 

Repossession Is Not An Option

Some people are overwhelmed with debt because they have taken on too many loans. This could involve having multiple cars or homes, or a sudden job loss means that they now can't make the monthly payments. In this situation, repossession of the secured assets would be a better solution to bankruptcy. You'd simply lose the assets that you cannot pay for, and then you no longer hold the debt. You would lose the equity you have earned in the asset, but that is a small price to pay to get rid of the debt.

On the other hand, for some people, repossession is not an option. If you only have one home and one vehicle, then you might need to use bankruptcy to prevent yourself from losing those important assets. Bankruptcy can help restructure your debt, discharge what can be discharged, and consolidate what remains at a fraction of what is originally owed.

You Do Not Have Many Assets

Bankruptcy often requires that someone liquidates all of their high-value assets in order to pay off as much debt as possible. If you have many of these qualifying assets for liquidation, it can be quite devastating to have to get rid of them. However, those that do not have high-value assets do not have much to liquidate. This means that you'll just have to deal with debts that cannot be discharged in the end, such as back taxes and child support, and be able to discharge the credit card debts and medical bills. 

For more information, reach out to a bankruptcy attorney in your area.