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Is it time to file for bankruptcy?

On Behalf of | Jul 12, 2021 | Bankruptcy

Overwhelming debt can affect your entire life. If you are struggling to pay your debts each month, even on critical items like your home and your vehicle, you probably know that your job, your health and your relationships may suffer. Bankruptcy is a viable and valuable option for seeking a way out from under crushing debt. This may be a relief if you have tried other steps to pay down your debt. 

However, bankruptcy may not be the most appropriate step in certain circumstances. Before you decide to take steps to file for debt relief with the Arkansas courts, you would be wise to learn as much as you can about the types of debt involved in bankruptcy and the factors that would make you a good candidate for seeking this kind of relief. 

Signs you may be ready 

Bankruptcy can be a lifechanging experience. Not only might it relieve you of your debt burden, but it also provides essential credit counseling and protection from collection actions. There are some debts, however, that you may not include in your case. For example, debts involving child or spousal support, student loans, governments debts, or payments related to personal injury or DUI judgments may require another route for relief. On the other hand, the following circumstances may indicate bankruptcy is an option to investigate: 

  • It will take more than five years to pay off your debt. 
  • Your debt consists of credit cards, home and vehicle loans, medical debt, utility bills, and similar obligations. 
  • You are receiving threats of vehicle repossession. 
  • You are behind on your mortgage, or your home is in foreclosure. 
  • Your creditors have garnished your wages. 
  • You owe more than you earn on debt like credit cards or personal loans. 
  • You have used your savings and are skimming from your retirement to make ends meet. 
  • You use credit cards for everyday purchases. 
  • You have exhausted every other resource. 

If these describe you, your next step is determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy 

Which is right for you? 

Chapter 7, which effectively discharges eligible debt, is appropriate for those whose income and assets are too low for them to afford to repay any of the debt. Chapter 13 works for those who have a steady income and who can repay part of their debts through a payment plan.  

It is important that you understand the short and long-term consequences of bankruptcy, including its effect on your credit score. But for many who are overwhelmed with debt, the hit to their credit score is worth the peace of mind they receive.