When should I file for bankruptcy protection?
Many people consider bankruptcy protection as the last resort. It remains on your credit report for up to 10 years, depending on which chapter you file. It can be a difficult yet wise decision if you are struggling to make ends meet.
Here are a few signs that may suggest filing bankruptcy is a good solution.
Decrease in monthly income
A permanent change in monthly income may be tough to adjust to. It could be the result of job loss, reduced hours, a job change or retirement. If you are unable to adapt to a permanent reduction in monthly income, bankruptcy may help. It could relieve reoccurring financial struggles, such as mounting credit card debt.
Increase in monthly debt
The stigma of bankruptcy often keeps consumers in a whirlpool of mounting debt. Many opt for overuse of credit cards to pay for necessities, such as groceries and utility bills. This can escalate into out-of-control debt. During challenging financial times, you may have to pay credit card payments late or skip them altogether. This gives the credit card companies the ability to raise your interest rate.
Bankruptcy may offer financial relief when struggling with medical expenses or student loan debt. Bankruptcy forgives most medical debts. Although it is rare for someone to have student loan debt discharged, filing bankruptcy may temporarily suspend payments. Additionally, you may be on a better track to make your student loan payments after bankruptcy has eliminated other debts.
Change in living arrangements
Changes in your living arrangements often affect monthly expenses. Death, divorce or a grown child moving back home are typical scenarios. If you own your home and have monthly mortgage payments, it is important to stay current. Falling behind by a few months will affect your ability to maintain regular payments and can lead to foreclosure.
Banks and mortgage companies must abide by the decision of the bankruptcy court. Do not hesitate to file bankruptcy to protect your most important asset – your home.