Sunday, May 25, 2008

Is Bankruptcy The Best Option for You?

Bankruptcy is a financial practice that allows you to officially declare that you cannot repay your debts now and do not see how it will ever be possible in the future. Declaring bankruptcy is a big step – both in the short and long term ranges. For some people, there are other ways to get out of debt, like debt consolidation or negotiating with your lenders.

However, if your best option to get out of debt is bankruptcy, then you should take steps to make this financial situation work in the best possible way for yourself and your family. A financial advisor can help you do that. In any case, before you jump into anything, you need to fully decide whether bankruptcy is right for you.

Learn As Much As You Can Before You Proceed

First, it is important to learn as much as you can about bankruptcy. For individuals, there are several types of bankruptcy that can be filed. There are other options for businesses and entities. Learn the difference between these so you can see how they work. If bankruptcy is right for you, you must be aware of your obligations and your lenders’ choices.

Once you have learned all you can about bankruptcy, take a moment to consider other options. For example, whether you could consolidate your debts into one large monthly payment. If you are considering bankruptcy because you just barely miss paying off your bills on time every month or if you feel overwhelmed by credit card debt, this may be a great option for you. You can also try doing nothing and living simply for a number of years, which works well if you have no family for which you are responsible. Another options is negotiating with your lenders. In the end, there are many different options other than bankruptcy, so make sure that your second step is to consider them all.

There Are Requirements

Next, check out the requirements for eligibility for declaring bankruptcy. If your debts are too high and your income too low, you will qualify for one type of bankruptcy. On the other hand, if your income is too high and your debts too low, you probably won't qualify for bankruptcy. In some cases, you may not qualify for either, and this is a sign that you did not think through your other choices.

Consider all of your property and debts if you do qualify. What will happen to your home? Your car? Your retirement plan? Every country has different specifications on this topic, so you should make sure you FULLY understand how your property might be taken into consideration. Also, it is important to begin compiling lists of your assets and debts. Remember that some debts cannot be wiped out, like child support payments.

Seek Guidance When You Declare Bankruptcy

Once you have all your information compiled, you can begin the declaration process. It is best to work with a lawyer or financial professional to complete this task, and remember to always be completely honest. Declaring bankruptcy is not for everyone, but it can work for some people.

No comments: