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Should I File for Bankruptcy?

Malcolm Tatum
By
Updated May 17, 2024
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The decision to file for bankruptcy is one that should not be made in haste or without a great deal of thought in advance. Unfortunately, there are people today who see bankruptcy as an easy way to resolve financial woes and do not consider alternatives that could work just as effectively. If you are wondering if you should file for bankruptcy, here are some things you should consider before making your final decision.

In the best of situations, bankruptcy is intended to assist people who find themselves in adverse financial circumstances that have become overwhelming. There are several good indicators that you either are on the way or have already reached a state where bankruptcy is at least a viable option. One of the most common signs has to do with the status of your current outstanding debt.

People who choose to file for bankruptcy are often behind on making payments on loans, mortgages, and credit cards. There may be some effort to cover these late payments by transferring balances to other cards or to borrow cash off one card to catch up the payments on another card. When coupled with the regular use of credit cards to pay for necessities such as food without having the ability to pay off those balances within a reasonable amount of time, there is a strong chance that bankruptcy may be worth considering.

Other indicators that point toward the feasibility have to do with general finance issues. When assets such as cars and homes are currently worth less than the balances on the loans associated with the assets, there is evidence of severe financial trouble. If the situation has progressed to the point that it is almost impossible to afford home and auto insurance due to the debt load, it may be wise to declare bankruptcy and obtain some relief.

When unanticipated circumstances have led to financial instability, the decision to file for bankruptcy may be the right one. For example, someone who has experienced a severe accident may not be able to work for an extended period of time. Without a steady income, savings are quickly exhausted. There remains nothing left to pay for utilities, rent, the mortgage or handle the portion of hospital bills not covered by health insurance. People who are in situations of this type may find that declaring themselves bankrupt is the best solution.

There are other considerations that may come into play when deciding whether or not to file for bankruptcy. Constant calls from creditors and collection agencies indicate that the debtor may need to consider seeking legal protection from the creditors. Debtors who are paying extravagant interest rates due to habitually making late payments may also consider bankruptcy as the only way to get out of debt and make a fresh start. If there is a garnishment on wages and salary, that is a definite sign that bankruptcy should be considered.

It is important to recognize that choosing to file for bankruptcy does not mean that once the court of jurisdiction approves the plea that everything can continue on as before. While many people do declare bankruptcy because of extreme and unforeseen financial circumstances, it is more common for people to end up in a bankruptcy court for no reason other than poor financial management. If this is the case, the decision to file for bankruptcy must be coupled with a commitment to seek professional assistance to learn and implement sound financial accounting principles so that there will never be a need to go through the process of bankruptcy again.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

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Malcolm Tatum

Malcolm Tatum

Writer

Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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