Finances are difficult to manage. If things are getting out of hand, you may be considering several potential resolutions, one of them being bankruptcy. Filing for bankruptcy may sound like an extreme decision, but if you do it at the right time in the right way, it can benefit you financially and emotionally.
Even though bankruptcy may sound scary, it is often the right decision when there is nowhere else to turn. Here are a few indicators that bankruptcy may be the right option for you.
1. You are in a long-term crisis
Everyone encounters financial hurdles every now and then. Sometimes, you may end up paying off debt for a few months. But if it will take years to pay back your debts, it may not make sense to continue using your money in that way. Instead, bankruptcy can set you free and get you in the position to get back on your financial feet.
2. Your assets are at risk
A little bit of credit card debt or missing one month of a mortgage payment usually is not enough to put you at risk of immediately losing your assets. But if your debt accumulates over time, debt collectors may start coming after your car, home or wages. If you are afraid of losing your home or having your wages garnished, it may be time to consider declaring bankruptcy.
3. You are spending savings or retirement funds
If you are able to manage your debt with some of your savings or your current income, you do not have too much to worry about. But if you are raiding your savings or retirement accounts to pay back your debts, you may be in big trouble. You should not need to rely on these sources to keep yourself afloat. Declaring bankruptcy may save your much-needed funds for emergencies and retirement.
Ultimately, it is up to you whether filing for bankruptcy is the right choice.