When Should I File For Bankruptcy?

With the length of time a bankruptcy remains on your credit file, it is important to know when to file for bankruptcy. It might be best to file for bankruptcy after you are told to do so during debt counseling. If you have tried to negotiate with your creditors and large amounts of debts owed, might be another example of when it is necessary to file for bankruptcy. 

Receive Debt Counseling

Anyone facing bankruptcy should look into receiving debt counseling. This involves sitting down with a reputable debt counseling service and discussing your current situation. For the debt counseling meeting you will need a copy of all the creditors owed, and how much is owed to them. The debt counselor will be able to advise if bankruptcy is the only alternative you have. In some cases, the debt counseling services will contact your creditors to negotiate reduced or consolidated payment terms. 

Negotiate With Creditors

If the debt counseling company does not contact your creditors, it is advised that before filing for bankruptcy to contact each creditor yourself to determine if any type of payment arrangement can be made. This arrangement can be as simple as paying only what you can afford to lengthen the loan period. Some creditors may allow you to pay lower than the required minimum monthly payment if an agreement is reached. Negotiating with creditors is also a way of coming to a settlement agreement. They may agree to forgive a portion of the debt if this will help with paying off the loan.

The Amount of Debt

Another aspect to look at before filing for bankruptcy is the amount of debt you have. Filing for bankruptcy may be an option when you are currently only able to afford to pay off the interest on your debt, and are not able to pay off the actual loan amount. As payments are missed or late payments are processed, creditors will add on fees in each of these circumstances. These fees are further compounded by the charges as the loan remains unpaid. Someone in this situation should consider as many legal ways as possible to raising money to go towards his or her debt.

The Type of Debt

When thinking about if you should file for bankruptcy, it will not only be important to think about the amount of debt you have, but also about the type of debt. There are certain payments that will not be discharged after filing for bankruptcy. Thus the person may still be liable to pay them even after filing for chapter 7 in court. For example, bankruptcy is not a way to avoid having to pay alimony or child support. Depending on the specifics of your case, you may still have to pay your support payments.

Getting Legal Help

However, the information provided above is only to be used as a guideline for if you should file for bankruptcy. Instead it is recommended you seek advice from a professional attorney about  your specific situation.