Many factors can lead to a person needing to file for bankruptcy. No matter what brought you to the point of considering this action, several key points can help you determine whether you should file your petition.
In some instances, there are other options that might work to get you out of this tough financial spot.
Factors to consider as you plan your next steps
- Borrowing money. Once you file for bankruptcy, you won't be able to seek out new lines of credit during the process. When your case is over, you will have to rebuild your credit, so you will be viewed as high risk. This limits your ability to borrow money.
- Keeping your retirement accounts. Your retirement accounts aren't going to be taken in a bankruptcy case. In 2005, the Supreme Court ruled that these assets can't be claimed by creditors.
- Assets can't cover debts. When you can't pay your creditors, they will sometimes threaten to take you to court. If you have more debts than you have assets and simply can't pay what you owe, bankruptcy might help you to get back on track.
- Creditors and negotiation. Sometimes, the companies to which you owe money might be willing to negotiate payment terms so that you can pay them. If they aren't doing this, then filing for bankruptcy might be necessary. Depending on the chapter you file under, the companies might have fared better with a settlement.
- Creditor harassment. Once you file for bankruptcy, your creditors can't contact you thanks to the automatic stay. This prevents them from attempting to collect debts from you, so you can check the mail and answer your phone without worrying about them trying to get money from you.
- Credit counseling. Part of your bankruptcy case involves going through credit counseling and learning how to manage your credit responsibly. Being willing to take this information in can help you to rebuild your finances after the case is over.
You may have other considerations, too. Make sure you understand how all applicable factors are likely to impact your case. A knowledgeable attorney can help you understand all your options.