To Bankruptcy Or Not To Bankruptcy?

Bankruptcy can be a useful tool if you're struggling with insurmountable debt. However, it also has long lasting consequences. After all, nobody would ever lend money if people could just simply decide not to repay and then go out and borrow more money. But if you've been struggling with life challenges such as a job loss or medical bills, bankruptcy was designed for you and it may be best to take advantage. Here's how to decide.

What Type of Debt Do You Have?

Not all debt can be discharged in bankruptcy. This means that even if you successfully complete the bankruptcy process, you'll still be responsible for paying some types of debts.

This includes most student loan debt as well as certain types of legal judgments, tax bills, and other debts. Be sure to ask your tax attorney for specifics.

How Old is the Debt?

If your debts are very old and you haven't been sued to repay them, bankruptcy may not make sense. This is because these debts may expire on their own.

You may be protected from lawsuits or future collections action by state statute of limitations that give creditors only so long to bring a claim—the time varies by state. Furthermore, your debts can't stay on your credit report forever; again, the time varies, but it's usually around seven years after the original debt that the debt has to be removed.

Can You Make Alternate Payment Arrangements?

Bankruptcy may mean your creditors won't get paid at all, so they may be willing to work with you. Even if you think they're heartless, they really just want as much money as possible.

This means that they might be willing to give you a longer payment plan or accept a settlement for less than the full amount you owed. They don't accept out of the goodness of their hearts but because their math tells them that's the most they can expect to get. So give them a call and try to make a deal.

Do You Have Any Other Options?

Bankruptcy destroys your credit score which you may not care about if it's already damaged from missed payments. However, you'll also be barred from filing for bankruptcy again for a certain number of years depending on the type of bankruptcy.

Make sure you explore any other possible options to keep this last resort open if life throws an even bigger challenge at you in the near future.

To learn more about whether you should file for bankruptcy, contact a local bankruptcy lawyer today.