With the recent global health scare and resulting economic crisis, it is no wonder that many people are feeling the financial pinch heading into the summer. You may be among those who are going through a tough time as you try to make ends meet following a work slowdown, layoff, job loss or other setback.
You may be feeling panicky, especially if you are falling behind on some of your bills and are unsure of how you will be able to catch up. You may even be considering filing for bankruptcy to get out from under your debts. While bankruptcy may be a viable option, you will want to make sure it is appropriate for your situation before you take such a serious step.
Does your debt qualify?
If most of your debt consists of student loans, spousal or child support, back taxes or personal injury judgments against you, you may want to look for another route to reduce your debts. These and certain other types of debt usually do not qualify for bankruptcy discharge, so you may not benefit from this option. However, if you can relate to any of the following circumstances, bankruptcy may be the alternative that can help you get back on your feet:
- Your creditors are garnishing your wages or have threatened to begin garnishment.
- Your home is under threat of foreclosure.
- Your auto lender is taking steps to repossess your vehicle.
- You are paying bills using money set aside for retirement or your emergency fund.
- You use your credit cards to make routine purchases.
- Your creditors have filed lawsuits against you for unpaid debts.
- You are in danger of having your utilities cut off.
- Your debt is greater than your yearly income, or you have more debt than you can pay off in five years or less.
- Your debt consists of eligible credit, such as credit cards, medical debt, house and car payments, personal loans and utility bills.
- You have exhausted every other option for getting out from under your debt.
These options may include negotiating with your creditors, refinancing, trying to add to your income and cutting your expenses. These methods do not always work, and they may not offer some of the benefits of bankruptcy, such as potentially wiping out many of your debts. Bankruptcy also includes an automatic stay that prevents your creditors from proceeding with collection actions, such as repossession or wage garnishment.