There are a variety of reasons why people who are overwhelmed with debt are afraid to file for bankruptcy. They may fear losing control of their finances or be scared about the damage bankruptcy will do to their credit score.
Those are valid concerns, but there are some situations when bankruptcy is your best option for managing your debts.
If you are wondering if bankruptcy is the best option for you, contact the Cincinnati bankruptcy attorneys at O’Connor, Acciani & Levy today for a free legal consultation. We can carefully review your situation and help you decide the best course of action, which could include filing Chapter 7 or Chapter 13 bankruptcy.
If you decide to file bankruptcy, we can guide you through the process to help ensure you achieve the most favorable outcome possible.
Signs Bankruptcy Is The Best Option
It can be hard to tell when bankruptcy is the right choice. However, if you find yourself in any of the following situations, bankruptcy may be the best option:
- You are behind by more than one month on major bills such as a mortgage or car payment and cannot catch up.
- You are unable to pay basic expenses each month without using credit cards, such as utility bills, transportation costs or groceries.
- You have to take out payday loans, cash advances on credit cards, or other forms of high interest loans to make ends meet.
- You have lost a significant source of income.
- You have incurred a drastic increase in expenses, such as large medical bills.
- You have tax debt that you cannot pay off within two years.
- You cannot make more than minimum payments on credit cards and other debts.
- You suffer anxiety or lose sleep due to your worry over money and making payments.
- Your home is in foreclosure or your vehicle will be repossessed.
- The debt you owe on liabilities is higher than their fair market value.
- You are being constantly pursued or harassed by creditors.
- You are unable to obtain another form of debt relief through credit counseling, such as consolidation or a modified debt repayment plan.
- You do not think your situation could improve because it does not look like you will come into more income, through a higher-paying job, gift or inheritance.
- You are comfortable walking away from your financial obligations and will not feel like a failure for filing bankruptcy.
- You meet the requirements for filing Chapter 13 or Chapter 7 bankruptcy.
Benefits Of Filing Bankruptcy
Despite the fact it is often viewed in a negative light, there are many benefits to filing bankruptcy.
For instance, bankruptcy helps to stabilize your finances. If you file Chapter 7, you can erase some of your unsecured debts, including:
- Credit card debt
- Personal loans
- Medical expenses
- Civil judgements for charges excluding fraud
- Business debt
- Past due rent and utilities
- Certain older tax debts
This will make it a lot easier to pay your bills each month and effectively manage your finances.
Bankruptcy Helps Improve Credit Scores
This may sound counter-intuitive, but filing bankruptcy will help improve your credit score in the long run.
Your score has probably already taken a hit because you have been overwhelmed with debt. Getting behind on monthly payments and having debts go to collection can lower your score by a lot.
However, once you file bankruptcy, debts will be discharged or you will have a payment plan you can stick to. This will make it a lot easier to manage your finances and eventually get out of debt, which helps improve your credit score.
A study conducted by researchers at the Federal Reserve Bank of Philadelphia found that many bankruptcy filers’ scores rose steadily after their bankruptcies were completed.
Researchers discovered that the average credit score for a Chapter 7 bankruptcy filer in 2010 was 538.2 before filing bankruptcy and 620.3 after the bankruptcy case was discharged.
The study also found that average credit scores for Chapter 13 filers rose from 535.2 to 610.8 once their cases were completed.
Increased Access To Credit
Another benefit to filing bankruptcy is that it will help you access new lines of credit. People who completed bankruptcy filings were more likely to be given new credit lines within 18 months compared to individuals who were 120 days or more behind on their payments, according a study from the Federal Reserve Bank of New York.
Contact Our Cincinnati Bankruptcy Attorneys Today
If you are unsure whether bankruptcy is the best option for your financial situation, complete our confidential, no obligation bankruptcy survey. It will allow our experienced lawyers to analyze your situation and contact you to discuss your legal options.
We can advise you on what is in your best interests. If bankruptcy is the right option, we can guide you through the process to ensure it is handled correctly so you can come out of it in a better financial situation.