When is the right time for bankruptcy?

Life can be unpredictable. It can be downright hard. Sometimes people get sideswiped so badly, they can’t quite recover. Imagine having bill after bill and no way to pay them. No one wants to entertain that idea. Assuming this does happen, or you think you’re on your way, there is something you can do so you don’t lose everything. Think of it as a possible fresh start.

Bankruptcy has a negative ring to it, as well it should. After all, if you’re filing for bankruptcy, something horrible has happened. Bankruptcy can help, however. There are different types. This article goes over bankruptcy in broad strokes to give you an idea of what it looks like.

So, what is it?

Simply put, bankruptcy is the clearing away of debt. Should the situation arise, and you cannot financially pay your bills, a court can decide to remove the debt in some way. This is meant to give you another go at life.

Am I likely to get it?

More likely than you’d think. A 2016 study by The American Bankruptcy Institute found that almost 96% of the people who filed Chapter 7 bankruptcy were approved.

How do I know when to file?

According to Bill Fay of debt.org, a good rule of thumb is if it will take you more than five years to pay off all your debt, you might want to consider bankruptcy. This is no substitute for contacting a financial planner and seeing what they say. It’s just something to think about.

Is there a downside?

Indeed, there is. Yes, your debt will go away, but this does affect your credit score and potentially your ability to get new credit. Also, some debt can’t be eliminated, such as student loans.

Conclusion

Bankruptcy may be your answer to the financial hole you can’t seem to dig yourself out of. If you think this is the case, please consult a bankruptcy attorney or financial advisor if you can. It isn’t the prettiest way to get rid of your debt, but it is a way.