In a time of economic crisis and increasing consumer debt, bankruptcy filings are on the rise. You may wonder if a personal bankruptcy is the right solution for your case. Before you opt for tackling your debt in this manner, ensure that you are a good candidate and that it is the right time to file!
Not all debts are covered
Did you know that your child support or spousal maintenance debt will not be covered? Moreover, monies owed to the Higher Education Contribution Scheme and also the Department of Social Security remain due and owing. If a big portion of your debt consists of outstanding amounts to these agencies, you are not a good candidate for bankruptcy.
Bankruptcy Offers Relief from Secured and Unsecured Consumer Debts
On the flipside, if you have accumulated a lot of unsecured consumer debt but are no longer able to pay all of your creditors, you may indeed be a good candidate for a bankruptcy. The same holds true for secured creditors, as long as you are willing to relinquish possession of assets that secure these loans. This usually refers to property secured by a mortgage or bill of sale.
Is the Time Right for a Bankruptcy?
Do not go ahead until after you have consulted extensively with a financial counselor. Only after you have taken the time to write down all outstanding debts, principal balances, monthly payments, and also all forms of income, will you have the opportunity to soberly evaluate your overall indebtedness.
Alternative solutions
Debtors oftentimes find that a binding debt agreement sufficiently lowers the amount of outstanding debts and makes it affordable again. If a debt agreement does not provide the needed relief, a personal insolvency agreement might just offer the flexibility needed to settle debts in such a manner that a bankruptcy is avoided. Although both of these options will have adverse effects on your credit profile, they do not wreak the havoc that an outright bankruptcy filing entails.
Only after you have considered these options – preferably with the help of a skilled debt counselor – does bankruptcy hold the opportunity for viable relief. If you are at this point, then the time is now; you should file for bankruptcy quickly to take advantage of the court ordered debt eradication and settlement.