Is it Time to File for Bankruptcy?

Are you dealing with financial difficulties? These can come in various forms like medical bills, mortgages, unnecessary expenses, failed business ventures, poor debt management, and many others. In such cases, you might have to seriously consider filing for bankruptcy. However, this isn’t always the case.

When you file for bankruptcy, it provides momentary financial relief, but it will also negatively affect your credit score and capacity to borrow money. Future creditors will think twice before lending you money once they know you filed for bankruptcy. So, before you file, you have to consider the following things first, according to a bankruptcy lawyer from Salt Lake City.

Temporary Situation

Is your financial woe momentary? If so, you might have to think twice before filing for bankruptcy. If you qualify for unemployment benefits and if you are capable of getting a different job, then postpone filing.

Sources of Income

Consider getting a second or even a third job to pay off debts instead of filing for bankruptcy. Work during the weekends and in the evening to gain extra sources of income.

Follow a Budget

Your debts may take several years to pay. But instead of feeling depressed, try to follow a budget. This simple solution may alleviate your financial problems slowly but surely. Reduce or remove unnecessary costs to pay off debts faster. Prioritize essentials and paying creditors before anything else. Downsize, go minimalist, find roommates, reduce car usage or just sell your vehicle and walk to places. These are just some things you can do to save more money.

Negotiate with Creditors

Before you declare bankruptcy, try negotiating new terms and rates with your creditors. You may find a compromise with them to pay in various installments. They may also consider modifying the program and interest rates rather than lose money outright.

Now, bankruptcy comes in different forms, and the two most common are Chapter 7 and Chapter 13. You will need to determine if you qualify for either one before you file an application.

Business Person holding an empty wallet

Chapter 7 Bankruptcy

This is the type of bankruptcy that releases you from paying off debts. You can keep some assets, but non-exempt assets will be used to pay off debts from creditors. These can be accounts, cash, and stocks.

Chapter 13 Bankruptcy

This type of bankruptcy is for debtors who must pay part of their debts and have some of it forgiven. This is an option for those with incomes that are too high to qualify for Chapter 7. Applying for Chapter 13 is only possible if debts are at a particular amount. Those who opt for this type must have a three to five-year plan of repaying their outstanding debts.

Financial problems are avoidable, as long as you follow a budget and maintain a certain lifestyle. However, there are uncontrollable situations that will make you spend more such as serious illnesses, emergencies, and job loss. In such cases, bankruptcy is a possible option after you have exhausted all others.

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