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When Is the Right Time To File Bankruptcy?

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When Is the Right Time To File Bankruptcy? Powered By Docstoc
					When Is the Right Time To File
Bankruptcy?


You may be wondering if there is a particular time that is best to file for bankruptcy.
What many people may not know is that the best time to file for bankruptcy really
depends on your particular financial situation. Bankruptcy filings are not handled any
differently according to the time of year you file or the status of the economy. Each filing
is managed according to your unique financial situation and no two filings are the same.
However, there are a few ways to recognize when filing bankruptcy might be the most
beneficial for you.

Consider Your Options

The most important thing to consider is whether bankruptcy is your only option. It is
always best to pursue other debt management options before filing. The best way to
protect your credit and rebound into obtaining credit again in the future is to repay your
debts in full. Before filing for bankruptcy, contact your creditors to try and negotiate a
payment plan that suits your budget. Many lenders are willing to work with you in order
to recoup the money loaned, rather than potentially lose the chance for repayment
through Chapter 7.

Often times you may be able to secure a reduced interest rate or principal amount in order
to settle your debts. Mortgage lenders also offer ways to reduce your monthly mortgage
payment while you get caught up on payments. There are many mortgage loan
modifications that mortgage lenders may agree to in efforts to help keep the house out of
foreclosure. The lender also suffers when a home goes into foreclosure and they may be
willing to reduce your interest rate, extend the life of your loan, waive delinquency fees
or suspend payments for a short period of time.

For many people, bankruptcy is the only option. There are times in life when the
unexpected happens and we find ourselves in an extended financial hardship. You may
have lost your job, your spouse or experienced a significant medical situation that has led
you to financial trouble. For those that cannot afford to continue to make their payments,
let alone get caught up on missed payments, bankruptcy is your only option. Bankruptcy
protection can help you eliminate most, if not all, of your debts and regain control over
your finances. There are several signs you should look for in order to determine if your
financial situation has left you with few options.

Watch For Signs
The first indicator of financial trouble is multiple missed payments. Once you have
missed a payment or two your credit will likely be affected. This is the point where the
creditors start calling and making collection attempts on the debt. For secured debts, your
assets become at risk for seizure and liquidation. Secured debts such as, mortgage loans,
car loans and payday loans leave you vulnerable to losing your wages or possessions.
When you file for bankruptcy, your wages and most of your property can be protected
from the hands of creditors.

Another sign you may be ready for bankruptcy protection is when you begin to take out
more credit to pay other sources of debt. There are many companies that will offer small
personal loans that can be used to pay your bills. The problem is that these loans often
use one or more of your assets as collateral on the loan, leaving these assets at risk in the
event you default on repaying the loan. These loans typically have large interest rates that
will keep you in debt for years. In general, it is never a good idea to take on more debt in
effort to repay other debts. This practice suggests that you have more debt than income.
Bankruptcy allows you to eliminate nearly all of your debts and provides you with a
clean slate to put you on the path to financial stability.

Many times people make the mistake of dipping into their savings or retirement to pay
their debts. There are times when using a small portion of these funds to repay a debt is
beneficial, but the trouble begins when this becomes a habit. The workforce is now
increasing with an aging population that is finding themselves working a full time job,
rather than enjoying retirement. So many people have to work into retirement, not only to
make ends meet, but to continue to make payments on debts they acquired years ago.
When medical bills begin to pile up and income is low, many hard working people are
finding themselves under bankruptcy protection.

Fortunately, bankruptcy is available to help those that have fallen on hard times have a
chance to regain control over their financial future. It can be a great tool that serves many
people each year to get out of debt and back on track. Knowing how to examine your
financial situation, review all of your options and make an informed decision is the first
step to financial freedom.

				
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posted:7/19/2011
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