When You Should not File for Bankruptcy
Bankruptcy suddenly comes even though you might be planning for it. You would be in the right place financially and personally and then suddenly find your financial life in tatters and need a quick fix. At such a moment, the bankruptcy filing seems like a right way out. It implies that you will be acknowledging to regulators and creditors that you are no longer in a position to oblige to your debt. Many people will have reasons for going broke including car payments, sickness, and accidents. However, there are many things you should consider, and they can inform you when you should not file for bankruptcy.
When You Need to Rely on Creditors Shortly
It would not be prudent to file for bankruptcy when you still have loan demands based on your projected money needs. The bankruptcy will automatically blacklist you in many lender books for a while. Thus, you might find it very difficult to get low-interest loans. In this case, the bankruptcy will be a disaster in your financial life. On the other hand, the filing will not absolve you from paying some debts such as mortgages, and it may only get rid of small debts. You will not be saving much money in the end.
When You Have Property to Pledge as Collateral for a Debt
Most debt is unsecured, and you can go filing for bankruptcy to get rid of such liability. However, there are instances where you used your assets as collateral, and they will be subject to auctioning or repossession when you are not servicing the debt. In such cases, it would not be wise to go the bankruptcy route. Furthermore, the move will only trigger concern among lenders and cause many of them to avoid offering any further assistance to you since you will not become a high-risk borrower.
When the Process is Too Cumbersome
The process of filing for bankruptcy can take much longer than you expect, cost a lot of money, and fail to deliver the desired results. You have to go to court, and the must be a back and forth correspondence with creditors and loan assessors to qualify you are a person who is unable to pay your debts. The court process might drag you away from productive activities that give you additional money, which would go a long way towards meeting your debt obligations.
When You are Likely to Lose Prized Possessions
Other than the assets tied to your debt, there might be prized possessions in your home that the court orders you to sale to offset part of your debt obligation. Such properties might have meaning in your life that goes beyond their monetary value. You may not find them in future after you get money and bounce back to your feet. It is advisable that you seek other remedies for solving your financial problems in the short term and then find an alternative long-term solution such as drastically shifting your lifestyle and moving to a new neighborhood while servicing your debt.…