When you find yourself with excessive debt, it sometimes leaves you pondering about what to do to get rid of this debt. In many cases, the overwhelming debt forces some people to file for bankruptcy while others opt for debt consolidation or debt settlement. When is it time, however, to file for bankruptcy? Is there really a right time? There are some significant reasons why it may be a wise decision to file bankruptcy, but you have to consider it wisely and think about the consequences.
Handling Your Debts
Bankruptcy is like signing over your debts to oblivion. However, it could cost you greatly. You have to know how to handle those debts before it reaches the stage of no return. You can try title loans as a resort for not filing bankruptcy, but if you have to file, you need to be aware of the process and when it makes sense to just go ahead and take the plunge.
No Wiggle Room
There are certain circumstances where bankruptcy filing makes sense and can be of benefit to you. This is after you have tried negotiation with creditors and there is no other solution. At an attempt to negotiate with lenders and creditors, you find no wiggle room for progress; it is time to look into other means. If you cannot work out a repayment plan or the creditor just does not want to budge, you may have fewer options. At some stage in your financial life, you may have exhausted all opportunities for the lender to even listen to you or you may have forfeited a previous payment plan arrangement. So why would the lender even consider working out a repayment plan at this point? For that reason, the creditor may only be willing to accept full payment.
Liabilities and Assets
If you find that your liabilities are more than your income or assets, you may have to consider filing bankruptcy. For instance, if you owed the bank $400,000 on a debt where the monthly payment was $4,000 and you only had assets in the amount of $100,000 and income of $3,500 per month, you may have a few other alternatives than to file bankruptcy. However, if the debt was more and your income was lower, then you would have a debt problem that needed serious consideration of bankruptcy.
The Negative Consequences
There are some adverse consequences to filing bankruptcy at any time, even if this is your only option. In addition to feelings of failure, you will have to deal with the damage that filing bankruptcy would do to your credit rating. You may be able to borrow from a creditor or lender within two years of filing bankruptcy, but you would have to do so with a higher rate of interest and a higher monthly payment. The bankruptcy would also stay on your credit report for up to seven to ten years. Lenders and creditors will be leery of lending you money or offering credit.
There is no hiding behind a bankruptcy filing status since this is public record that anyone has access to. Bear in mind that this won’t be a personal matter anymore. Your debt will be known by anyone who has an interest in your financial affairs.