For many individuals, bankruptcy is a great way to get out from beneath oppressive debt, wipe the slate clean and start over. In fact, bankruptcy works so well for these purposes that nearly one million Americans file for bankruptcy each year. While bankruptcy is common, and while it can help you get out of a devastating financial situation, it is not for everyone. Bankruptcy comes with a few drawbacks, the biggest of which is the hit to your credit score. If you are thinking about filing for bankruptcy, you should only do so after giving careful consideration to your financial situation and other options. However, SmartAsset details four telltale signs bankruptcy is right for you.
The first and most obvious sign that bankruptcy is right for you is the fact you cannot pay your bills. If you reach a point where you are unable to cover your basic living expenses without turning to credit cards, and if making the minimum payments toward your debts proves to be too much of a struggle, it may be time to consider filing for bankruptcy.
If creditors begin to garnish your wages because you fall so far behind on payments, bankruptcy can protect you from further collections actions. Likewise, if a collection agency files a lawsuit against you, bankruptcy’s automatic stay can help to stop further legal action until the bankruptcy courts discharge or dismiss your debt.
Finally, if you face foreclosure on your home, bankruptcy may be right for you. While there are many homeowners out there who struggle to make their monthly mortgage payments, if your financial predicament has resulted in you falling so far behind you face foreclosure, talk to an attorney about filing for Chapter 13 bankruptcy. Chapter 13 helps to make your debt more manageable, grants the same protections as Chapter 7 and makes it possible for you to keep your home.