Not a lot of people want to make the decision of when to file bankruptcy, but you’ll also find that there is some point where it just may have to be done. You’ll want to keep in mind that bankruptcy will affect your credit rating and will have other ramifications.
Filing bankruptcy should only be a last resort when all other options have failed you. You may want to file for bankruptcy when you are constantly borrowing money from one credit source to pay another credit source or if you find yourself taking cash advances of more than $500 just to pay for living expenses. If you’re getting lots of calls from creditors and are borrowing just to meet regular expenses like food, then it may be time to file for bankruptcy.
A way for you to get out of your hard financial times is bankruptcy and it’s what you have to do when you can no longer afford paying your existing debts.
Keep in mind that there are many types of bankruptcy, but the most commonly filed form of bankruptcy is chapter 7 and a chapter 13.
For the individual, the most common is chapter 7. It is the complete erasing of qualifying debt. The debtor is then released from all repayment obligations. Don’t take chapter 7 bankruptcies lightly because they’re very serious. While giving you an immediate fresh start in repairing your finances, it remains on your credit report for 10 years. You’ll be noted as a person who is financially irresponsible and you’ll be seen as a high risk.
Chapter 13 is less harmful to your credit. Though there are still marks against you, because you will be working to repay your debts on a payment plan, you do not look like you are financially irresponsible, though you are still considered a slight credit risk. With a chapter 13 you will be able to keep your home and they will not start selling your assets to pay back your creditors like you would in chapter 7.
When you’ve gone through all other available options, only then should you consider filing for bankruptcy. With the help of consolidation loans, debt counseling, etc., you can reduce your debt and avoid bankruptcy. This can help save your credit record and improve your chances of getting credit sooner than if you file for bankruptcy. Consult a bankruptcy lawyer if there are no other options and ask for advice before you take action.
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