10 Situations Where Filing for Bankruptcy May Be the Best Option
1. Poor Credit Score
It sounds counterintuitive, but you can improve your credit score by filing for bankruptcy if you're already below 600. Many people contend with debt so long that their credit is already bruised and battered by the time they consider this option. Data shows that once filers' cases are discharged, usually within six months, their scores improve to an average above 620. And with time, this number can continue to steadily climb.While Chapter 7 and 13 bankruptcy filings will stay on your credit for 10 and seven years respectively, this is usually less detrimental than having several delinquent and/or collections accounts sit stagnant for years. Both of these can have a grave impact on credit, especially if you're unable to pay them in full. Bankruptcy, on the other hand, often provides an immediate boost to your score and allows you to continue building for the future.
2. No Access to Credit
This point ties into the previous. When your credit score is already low, you cannot access the money you need for a car loan or mortgage. It may be difficult to obtain credit immediately after bankruptcy, but studies confirm those who complete the process are more likely to receive new credit lines within 18 months than those who fall behind with payments and do not file.Although you will likely have low limits at first, using credit cards and loans responsibly will help to further increase your score. This is a much better way to meet your financial goals versus letting unpaid debts sit on your credit report and wreak havoc.
3. Seriously Overdue Debts
Once people fall severely behind on debts, and their financial troubles tend to mount. Many soon find themselves with court judgments and balances in collections. The problem is that once this cycle begins, it's difficult to pull ahead without help. Wage and bank account garnishments may quickly ensue, leaving little to no money to pay your rent, mortgage, or other crucial bills.Filing for bankruptcy helps reverse this situation by granting an automatic stay on collections efforts. This effectively ends lawsuits and garnishments to restore the money you need to live. Once the bankruptcy is discharged, depending on how you filed, you'll have either a clean slate to start over or an affordable monthly payment plan free of harassing creditor calls.
4. Job Loss in Johnson County, Kansas
5. Ongoing Medical Bills
6. Previous Overspending
7. Divorce or Separation
Some people file bankruptcy because of the legal fees alone, while others must do so following a wage garnishment to pay child support or alimony. The point is that a divorce can be financially devastating for a variety of reasons, and bankruptcy is sometimes the only way to see yourself clear.
8. Unforeseen Expenses
When property is lost, it's not just the home or dwelling that must be replaced. It's all the personal belongings as well, and in the meantime, immediate food and shelter must also be found. This expense alone can quickly drain a contingency fund and litter a path to recovery with obstacles.