Though the very term might send many people into a dizzy, declaring bankruptcy is not always a bad thing. Sometimes it might be your biggest saving grace in times of financial upheavals. However it has its downsides like bad credit scores, difficulty in obtaining and conducting future financial transactions and the like. Filing for bankruptcy is also a long, tiring, expensive and time consuming procedure. Some of the times and reasons when you can legitimately declare bankruptcy are:
When Credit Card Debt Takes Over Your Life
When you realize that you literally have no money (cash) to pay for your day to day expenses, it is time to realize that things are not right financially for you. You need to put the gas, grocery, medical bills, food and pretty much everything else on the credit card tab, you know that your situation is worse than you think. Also you might be paying off your credit card debt loan with another credit card. One credit card is used to pay the other’s debts. On top of this, the credit card company would have increased their interest rates to 30%, your over-limit fees are skyrocketing, and your miseries are only increasing by the day. When all this happens you know that you are unnecessarily accumulating debt and increasing your interest rates and now it’s time to file for bankruptcy.
Increased Interest Rates
You would have realised that it is hard enough to pay off your debts with the existing low rates, but in the case that you have missed a few payments then your interest rates will go up. Sometimes these interest rates can go up to 30% more if you missed a few payments. This means that more of your money is now going into paying off the interest rates than on the principal. This is going to further increase the time it will take to repay the debt. If you are not able to pay off these high interest rates or negotiate your way to lower rates from the lenders then declaring bankruptcy is probably the best option.
In times of recession, when people were shown the door by millions, declaring bankruptcy was becoming a huge thing. People were not able to pay their huge debts and loans with the dwindling economic conditions as it is. Losing a job only makes things more difficult. This is often one of the most common and popular reasons why people declare bankruptcy. Most people manage to pay their consolidate credit card debt and other types of loans with their overtime allowance and various other types of allowance. In the case that there is no job available, it might be really difficult to pay off those bills in the first place. You might end up having to sell your assets to pay off your medical bills and other day to day expenses itself. In this case, paying off loans almost becomes an impossible task. Hence declaring bankruptcy might be a way out of this difficult situation.