When Is Bankruptcy A Good Solution?

Filing for bankruptcy has never been a good idea and should be avoided as much as possible. Most of the time people file for bankruptcy when they do not need to do so. However, there are times when people are left with no option but to file for bankruptcy. The only way someone can know for sure that that bankruptcy is a good solution by analyzing their situation. The following are some of the things that one has to look at before deciding that bankruptcy is the only option.

1. You are in debt

If your debts are too high such that they are preventing you from covering your daily expenses, then you may need to file for bankruptcy. There are circumstances however where you are not eligible for bankruptcy, which is specified by ITSA — Insolvency and Trustee Service Australia. They just went through a transformation. For instance, you are not eligible if you have enough income to help you repay your debt. A person cannot file if they have enough money left to pay off unsecured creditors after paying for "allowed" monthly expenses such as food, school fees, rent, etc.

2. Are there any other alternatives to bankruptcy

Before filing for bankruptcy, it is always a good idea to look at other options that are available to you. One alternative is to work with creditors and come up with a repayment plan. Most creditors will understand a debtor's situation and agree to create a debt repayment plan with them. Some creditors may decide to lower their interest rates, lower the monthly payments or create an alternative long term payment plan. Most debtors would rather agree to these kinds of plans rather than agree to a repayment plan that is approved by a court.

3. Understand the debts that will be cancelled

Filing for bankruptcy does not mean that all your debts will be cancelled. There are certain debts that cannot be dismissed such as paying for alimony and child support, property repossession and secured debts, student loans, tax debts and any other non-dischargeable debts.

4. Are you ready to lose property?

This depends on how much property you used as collateral for a secured debt. There are certain states that have exemption laws which will guide you as to what you might or might not lose when you file for bankruptcy.

5. Consider what will happen to your personal life

When you file for bankruptcy, your financial records will become public and chances are that other people will find out that you are bankrupt. Your property may be taken away or you may not be allowed to spend your money the way that you want in the next three or five years.

6. Consider other repercussions that you may face

There are other repercussions that you may face if you file for bankruptcy. For instance, your credit card report will always have the bankruptcy report for the next seven years. In addition, you may not be able to borrow any money from your bank; this means that you will not be given car loans, mortgage, credit cards, etc.

If you have carefully analyzed the above factors and still find that filing for bankruptcy is the only option, then it might be the best solution for you.