You may be considering filing for bankruptcy if you have found yourself unable to pay off your debts. Before you take this step, ask yourself the following questions. The answers that you give to those questions may help you to make an informed decision about the suitability of filing for bankruptcy.
Have You Contracted Debts Recently?
Different jurisdictions have different regulations governing the circumstances under which one may be declared bankrupt. One of those conditions usually looks at how long ago someone incurred a debt. The terms of your bankruptcy order may exclude debts that you contracted within that minimum period before you filed for bankruptcy. Creditors may also argue that you cannot be freed from an obligation to pay them because you obtained that loan when you knew that you were about to file for bankruptcy. You should therefore only file for bankruptcy if you haven’t contracted any new debts within that minimum duration stipulated in the bankruptcy laws of your area.
How Much Do You Owe?
Consider the magnitude of the debts that you have before you file for bankruptcy. This is important for two major reasons. One, bankruptcy has far-reaching consequences, such as affecting your credit rating for several years. In that time, it can be very hard for you to get a loan to buy a home or car. Bankruptcy may even affect your eligibility for some jobs in your jurisdiction. Secondly, it may be hard for you to convince court to grant you a bankruptcy order if the sum of your debts is considered small. Consequently, you should only file for bankruptcy if the sum of the debts from which you seek relief can outweigh the likely long-term effects of being declared bankrupt.
Have You Considered All Your Options?
As already stated above, being declared bankrupt has many long-term effects. You should only file for bankruptcy after exhausting all other options, such as debt consolidation. It may also be possible for you to negotiate for restructuring your individual loans so that you can start repayments after improving your financial means once you get a job (if you had recently lost a job, for example).
As you can see, filing for bankruptcy is a very serious step that you should never take hastily. It is better for you to consult a bankruptcy solicitor so that he or she can assess your situation in relation to the applicable laws in your area. From that analysis, your solicitor will advise you on the best course of action that you can take to obtain relief from your creditors.