Bankruptcy is a great way to get out from under burdensome debt. However, it isn't for everyone. Bankruptcy can stay on your credit report for up to 10 years, and you cannot turn around and file bankruptcy again if you get into more trouble. For these reasons, the decision to file bankruptcy should not be taken lightly. Make sure you understand the benefits and consequences fully before filing. With that said, there are several circumstances that make bankruptcy the right decision. Following are a few examples.
Your Defaulted Debt Is New
Most debt is reported on your credit report for 7 years from the date of the most recent activity. In the case of defaulted debt, that means that you will have negative marks on your credit report for quite some time. Some defaulted debt, like money owed to the government, does not fall off at all. So, if you have debt that's not going to fall off or not going to fall off for quite some time, you can only have it removed by filing bankruptcy. Even if you pay off the debt, it's still going to report as negative for 7 years.
You Have a Judgment against You
If one or more of your creditors sues you in court, you could have a judgment placed against you. Judgments are nasty things. With a judgment in hand, creditors can take a percentage of your paycheck and seize your assets. What's more, judgments can be renewed when they expire. You could have a judgment against you for decades if you don't take care of it. In addition to paying off a judgment, you can get rid of it through bankruptcy. Bankruptcy is a good idea if you can't afford to pay off your judgment in one lump sum.
You Can't Afford Your Bills
If you have a bunch of bills you can't afford, and you're getting ready to default, you might want to file Chapter 13 bankruptcy. Chapter 13 bankruptcy allows you to restructure your debt. In many cases, you can negotiate for a lower payoff amount. Bankruptcy also consolidates all your debts. You will make one payment each month to satisfy the debt.
As you can see, there are several circumstances where bankruptcy may be a good idea. If you're not sure if bankruptcy is for you, talk to Curtis A. Anderson, Attorney At Law or another attorney. An attorney can tell you what to expect if you file or don't file.