Consider the word bankruptcy.
Hearing that someone’s choosing to file for it is considered to be as far as they can fall. It’s probably the most repeated term signifying poor financial condition in the gloomy times that we live in. And despite the frequent mention, the word still has very negative connotations. So much so that people facing this condition think that it’s the end of the line for them.
However, the truth is, getting to a position where it becomes an option is not the worst possible thing that could happen.
While in no way is it implied here that you should let yourself face the scenario of declaring yourself bankrupt, it isn’t all doom and gloom and here are a few things to keep in mind.
A Fresh Start
Bankruptcy is, in effect, a fresh start. Once the judge grants it, the creditors cannot come after for what you previously owed them. While it may be humbling when you realize that this is an option that you have to consider, it is a great way for most people to get out of servicing unfavourably priced debt such as the charges by credit card companies.
Filing for bankruptcy in the case of owing many thousands of dollars that is due to credit card companies who set a twenty five plus per cent rate would not be seen as a very bad thing. As it is, the series of late payments would already have affected your credit score adversely.
The Law Is Your Friend
Personal bankruptcy laws are on your side and you have to realize that. Besides, once you’re back in the black, you can consider repaying what you owed.
Filing for bankruptcy will as such liberates you from the worry of fulfilling those immediate yet unpayable commitments so that you can focus on making enough money to take care of your financial matters. You can start again, be more mindful of what debt you accumulate and then take better care this time so as to avoid falling into the same traps as before.
You Keep Your Savings
While it may seem prudent or easy to pay off your debts using the savings you made for the future, it is only a slippery slope where you’ll be left with nothing in the end. You may even incur additional expenses in terms of withdrawal penalties and taxes trying to pay things off this way. And even then, you might be left with debt which will eventually lead to filing for bankruptcy.
And so, in this case, the better option in this case is to keep what you have and then take care of what you can’t by filing for bankruptcy.
Better than Foreclosure
If you straight up allowed your house to be foreclosed upon, it looks even worse than filing for bankruptcy. The reason behind this is that it indicates that you didn’t even care to consider repaying what you owed, either by filing for bankruptcy and then renegotiating terms of payment or by selling your property (even at a loss) and then attempting to pay with the proceeds.
It may so happen, if your house was your only or major source of debt, that doing either thing will earn you some forgiving terms as far as paying back your dues go.
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