While lawyers and judges are the ultimate legal experts, of course, I believe that every citizen should take the time to learn a little about law for several reasons. First, it is important to know your rights, and knowing them can come in handy if anyone ever accuses you of a crime you didn't commit or threatens you legally in another other way. Second, learning about your local, state, and federal laws can help you act as a better citizen. When election time comes around, you can then truly understand ever change in law being proposed by a candidate and whether it benefits society or not. I plan to share posts about law topics explained in plain English on my new blog, so you can come back often to sharpen your legal knowledge!
Choosing to file for bankruptcy isn't an easy task. The actual filing is pretty straightforward, but making that decision to file can be a long process. While bankruptcy does have some long-term effects that you have to deal with, such as a lower credit score and having to explain the bankruptcy to potential landlords, it can also be the jumpstart you need to recover quickly. Remember, bankruptcy doesn't leave you constantly running around like your debt does. Once you've been approved, you can move forward. Here are a few things to consider when deciding whether or not to file for bankruptcy.
Income and Outgo
If your outgo is more than your income due to your debt, and what little savings you have is slowly being chipped away by the debt (and/or your savings isn't big enough to allow you to pay off bills and get some breathing room), it's time to file. You don't have to be hounded by collectors or on the verge of ruin to file. Sometimes just realizing that your situation is only going to continue to get worse is enough.
Maybe your paycheck is just large enough to cover basic expenses and your debt payments, but you're stuck paying the minimum, meaning nothing is really changing. Minimum payments can stretch out larger balances for a couple of decades if you can't pay more. If this is really affecting your ability to save for retirement and is making things very tight for you, it's worth it to investigate bankruptcy. You're going to spend so much on interest if all you can make are minimum payments, and filing for bankruptcy could be your ticket to financial recovery.
Calls and Letters
If you've fallen behind on payments and haven't been able to catch up, you're likely receiving lots of calls and letters from creditors that could be filling up your day and your voicemail box. If you simply can't catch up, it's time to look at filing.
Bankruptcy isn't meant to be a solution for everything, but it is meant to be a new start for those who have tried and simply can't move forward financially. Despite the initial issues you'd have with credit scores, you will recover, and you will recover a lot more quickly than if you tried to keep paying the small amounts you were barely managing. If you want to talk this over with someone, look for financial counseling centers and bankruptcy advisors.