There is no magic formula to decide whether bankruptcy is the right option for you or not. There is no hard and fast rule as to when you should file for bankruptcy. You can consider bankruptcy anytime you find yourself in overwhelming debts. But you should keep in mind that it is a serious decision to take. Bankruptcy is not an everyday debt relief option that you can opt for at your will. It is true that bankruptcy is crafted to erase your debts and help you have a fresh financial start. But there certainly occur some changes in your financial life post-bankruptcy which have effects penetrating into the heart of your personal life comprising of your near and dear ones!
Now, the obvious question is “why bankruptcy should be your last option”. A baggage of answers can be available to this. Most of these answers are influenced and colored by common myths related to bankruptcy. Most people dread it for the social stigma it bears. However, there are indeed some genuine reasons that must be taken into consideration before you decide to file for bankruptcy.
Firstly, bankruptcy filing will damage your credit score very badly. Usually bankruptcy remains on your credit report for about 7 to 10 years depending upon the kind of bankruptcy that you file. And it can question your credit worthiness and prevent you from acquiring loans and credit during the time span when bankruptcy remains on your credit report. Even if you own a business that files for bankruptcy your own credit rating will be seriously affected.
Your bankruptcy filing may have ripples in the financial lives of those associated with you. Your spouse, family, and family business may all be affected by your bankruptcy filing. Your bankruptcy filing can also have an adverse effect on your family business even if that business is conducted as a corporation. This in turn may result in the impoverishment of the business and cause the business to lose its access to bank loans and other funding agencies. When a business files for bankruptcy, creditors, customers, and suppliers of that business will almost always be directly affected once the bankruptcy petition is filed. Your bankruptcy filing will affect any person who has signed on loan or credit contracts with you.
It is true that despite all the pitfalls bankruptcy is the most logical solution when all else fails to resolve your overwhelming debt burdens. Your decision to file for bankruptcy should be supplemented with some sound legal advice. You should consult a reputable bankruptcy attorney in your state, if you intend to file for bankruptcy. Nevertheless, bankruptcy should definitely be your last choice.
So, before you file your bankruptcy petition, try and explore all possible alternatives, such as debt settlement and other management options before you file for bankruptcy. The best thing you could possibly do is enroll yourself in a reputable credit counseling session and get educated about the various ways you can manage your debts and finances without having to file for bankruptcy.
This article is guest post by BG, who is an IAPDA debt arbitrator associated with the Oak View Law Group.