Experiencing financial issues is one of the hardest situations to be in in life. And while using credit is a great way to get what you need when you don’t have the actual funds to afford it, it can also bring you swiftly into debt that you can’t seem to find your way out of.
If you’re in this situation, bankruptcy may be something that you’re contemplating. But before you make this big life decision, you’ve got to come into the circumstances with your eyes wide open. To help you in doing this, here are three things to consider before filing for bankruptcy.
How Much Debt To Try Paying Off On Your Own
Before you go through the process of filing for bankruptcy, you’ll want to put in some effort to handle your debt on your own. It’s going to be much better for your credit and the near future of your finances to avoid filing for bankruptcy if you can.
But before you pour off of your liquid money into paying off debts, you’ll need to think about how much money you might need to live on and for your future. For example, Cara O’Neill, a contributor to Nolo.com, advises that you don’t take money out of your retirement to pay off your debts. If you do so, while your debt will be lower, you also won’t have the money to support yourself when you retire, which could put you back into debt.
Who Else Your Bankruptcy Could Affect
While you might think that bankruptcy might be the right answer for you, you’ll want to consider who else might be affected by you filing for bankruptcy.
According to David Haynes, a contributor to The Balance, anyone that co-signed on a loan with you will now be fully responsible for paying back that debt rather than having that debt simply wiped clear. So before you leave someone you’re close to in the lurch, make sure you understand everyone that could be affected by your choice to file bankruptcy, since your bankruptcy will only affect your personal finances.
What Your Financial Future Looks Like
Once you’ve filed for bankruptcy, your financial future is going to be on shaky ground for a while, especially when it comes to borrowing money.
Knowing this, Debt.org recommends that you think about what bills you have coming up that you either will or won’t be able to afford. In some situations, it makes more sense to wait to file for bankruptcy after those bills have come in. Also, you’ll want to try to have your housing and transportation figured out beforehand, since borrowing money for these things now will be very challenging.
If you’re thinking about filing bankruptcy, consider using the tips mentioned above to help you know the best time and situation to do this.