Filing bankruptcy may be a scary prospect, and can have a damaging effect on your credit score, but for many people it's actually the best possible option. In some cases, filing bankruptcy is the fastest way to get a clean start financially and begin the process of rebuilding your credit and savings. Here are four reasons to consider personal bankruptcy:
You Can't Keep Up with Payments
While an occasional late payment to a credit card or other debt account can happen from time to time without major consequences, being frequently behind on payments is another matter altogether. Soon, late fees and interest really add up, and before you know it even the minimum payments on your various accounts are much more than you can manage. If your debt payments are unmanageable and you are majorly behind on payments, bankruptcy may be the best option.
You Feel Hopeless
When you have more debt than you can manage and don't see a clear way out, it is normal to feel stressed, anxious, depressed, and unable to focus or concentrate on anything other than your financial worries. Bankruptcy may provide you with a fresh start and free up money each month that can go into emergency savings, so you no longer have to feel as overwhelmed.
Your Situation is Unlikely to Change in the Near Future
Unless you are expecting a big raise, a settlement, or other windfall that will allow you to quickly pay down your debt, it's time to be realistic about your financial picture. In cases where the only way your finances will improve is to eliminate some debt but you don't have the funds to do this on your own, bankruptcy can be the right solution.
Your Credit Score is Tanking
Many people are hesitant to file bankruptcy because they don't want to negatively impact their credit score, but the truth is if you already have a large amount of debt and are behind on payments, your credit score is already getting lower every month. After bankruptcy, carefully avoiding unnecessary debt, enrolling in a free personal finance course, and perhaps taking out a small secured loan that you make timely payments on can all help you recover your credit score more quickly than you may anticipate.
To determine if bankruptcy is the best option for you, it's a good idea to schedule a consultation with an experienced bankruptcy attorney. Be prepared to go over the details of your financial situation, including debts and assets, so your attorney can make the most accurate recommendation.