When Should I Consider Bankruptcy
If you have fallen behind on your bills and the debt collectors keep calling your home, you may be considering bankruptcy as an option. While bankruptcy is not for everyone, there are certain circumstances where bankruptcy may be the right option. This is a very complex issue, so it is important that you explore all of your options before making a final decision.
One thing to really understand with bankruptcy, whilst it may be deemed negative by many, it is a tool to help people reclaim their lives. At a certain point you have to make the decision to cut your losses and start fresh and learn from past mistakes (if financial issues are based off of poor financial management). Some financial issues can arise from unexpected circumstances which are no fault of your own.
Below is a look at some things you should consider before deciding if you should file for bankruptcy or not.
Look at Your Income
Your first step is to look at the amount of income you are currently receiving. If you have little to no income coming in and do not expect to have regular income in the near future, it will be virtually impossible to pay off your debts. In addition, if the income you have coming in is only enough to cover your rent, utilities and food, you will also not have enough to pay off your loans. In these cases, bankruptcy may be the only option you have available to you. After all, you have to be able to have your basic needs meet before you can pay off any outstanding debts.
If you have a high income and have simply dug yourself into a hole, consider exploring debt consolidation and strict budgeting first.
Last Resort
If on the other hand, you have income coming in that covers your basic bills and still leaves you with some extra cash, you can probably make arrangements to pay off your debts. Most creditors will be willing to work with you and set up payment arrangements you can afford. You can slowly pay off your debts one at a time if that is what you need to do to get out of debt. If your creditors become unwilling to work with you on payment arrangements and are considering filing a lawsuit against you, then a bankruptcy may also be the right option for you.
Contacting a free financial counsellor is a good first step in getting professional assistance which can help steer you in the right direction.
Cannot Afford Bankruptcy
A problem that many people face is that even though bankruptcy may be the right option for them, they cannot even afford to file for bankruptcy. While each bankruptcy is different, the costs to file for bankruptcy can be in the hundreds or thousands of dollars. This does not even include the attorney fees, although you may find a lawyer that will allow you to set up a payment plan or even provide their services free of charge.
If are planning to file for bankruptcy, there are several steps you should take right now to protect yourself. The first step is to see legal advice to determine what your rights are under the law. As mentioned you should meet with a financial counsellor to determine if bankruptcy is the best option for your specific situation.
Bankruptcy certainly has a negative connotation attached to it. This is unfortunate as many situations surrounding bankruptcy can be out of a person’s control. Financial circumstances can change dramatically and quickly from instances such as job loss, injury, relationship break up and more. Bankruptcy is a means to help those in a very unfortunate financial situation and should be seen as nothing more.
For a full Bankruptcy overview visit the Australian Financial Security Authority
Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net
