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Bankruptcy: Points to consider before you file

The decision to file for bankruptcy can change your life. When you contemplating this route, weigh all the reasons why you should and shouldn't file for this financial protection.

Often, people are so overwhelmed by bills rolling in that they don't realize how much the desire to get out of debt is pushing their decision. If you are considering filing for bankruptcy, here are some questions to ask yourself:

What type of situation am I dealing with?

Bankruptcy might be a good option if you are dealing with a permanent situation that isn't likely to change. If your situation is temporary, such as a layoff that you will be called back to work from, you might not need to file bankruptcy. Sometimes, you might be able to get your creditors to work with you if you can come up with a plan and your situation is temporary.

Still, there are some other instances in which you might need to file bankruptcy for a temporary situation. You need to consider carefully your reasons for wanting to file.

Do I have any other options?

When you don't have other workable options besides bankruptcy, making the decision is likely easy enough. Sometimes, other options may be present. You might be able to transfer credit card balances to a no interest card, but be careful doing this. If something seems too good to be true, there may be a really good chance that it isn't true at all. Debt relief companies are often too good to be true, so beware of exactly what you are considering if you are thinking about using one of these companies instead of filing for bankruptcy.

What form of bankruptcy do I need?

Most consumers will file either Chapter 7 or Chapter 13 bankruptcy. There are huge differences. In a Chapter 7, you could get a debt discharge and not have to go through a repayment plan. However, some of your assets may be vulnerable to liquidation. In a Chapter 13 bankruptcy, you will have to follow a repayment plan set by the court. You must keep up with the payments, so preparing a budget is necessary. Such a plan may help with protecting assets. 

Whether you are considering bankruptcy to address medical bills, credit card bills or other debts, you should make sure that you find out how it will impact you right away and far into the future. This might also make an impact on your filing.

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