The word bankruptcy has been associated with a kind of evil that nobody should be talking about. We usually think of a person who has lived a life of extreme extravagance on a very average income and that is why he or she is in a position to be filing for bankruptcy.
Reasons to File for Bankruptcy
However, this is simply not the case most of the time. A state of bankruptcy is simply defined as owing more than you can pay, so you ask the government to step in and help you with your position.
And the reasons for being a position where you are considering declaring bankruptcy actually go far and beyond spending too much money.
For example, one of the biggest reasons why you would find yourself in this situation is if you had suddenly met with a debilitating illness when you were previously making ends meet with ease. You sometimes end up with a lot more medical debt than you can pay off. Other reasons include losing a job, being evicted, or being sued.
The law is there to help you
Declaring bankruptcy when you absolutely cannot make ends meet anymore is not a matter of shame. In fact, it is a call for help and you can easily start over once the process of paying off the creditors is over. And most people do bounce back on their feet eventually.
You would be surprised to know that many Chapter 7 and Chapter 13 bankruptcy filers eventually become homeowners again and live their lives peacefully in spite of the massive hit their credit score takes.
When Should you file for Bankruptcy
Even though declaring bankruptcy offers a fresh start, you should not think of it as an easy way out of your debt crisis. Since you can easily look up “how do I file for bankruptcy online?” now, it seems like the best way out. But you need to keep in mind that you would be living a very basic life for a couple of years once you do declare bankruptcy and moving on from this situation is not a piece of cake.
This is why it is important that you are fully aware of your situation before declaring bankruptcy. You should consider this option when:
Your Daily Expenditures Depend on Credit Cards
This does nothing for your situation but increases your debt significantly.
You Have Little to no Liquid Cash
If your entire monthly pay goes out on making debt payments and you have very little money for everyday expenditures like gas or grocery, then you might want to consider declaring bankruptcy. This might be one of the reasons why you are depending on extreme credit card usage as well.
A Second or Third Job isn’t Helping
If you are already putting in extra work hours every week and you still do not see any improvement in your situation, bankruptcy might be your best option.
The Interest has gone Way Up
Piling your debts too much eventually increases the payable interest which makes your situation a lot worse. Declaring bankruptcy, in this case, is a good option.