Private bankruptcy filings soared 9% in October 2009, making it the most popular month for these filings since the laws surrounding bankruptcies changed in 2005. This surge indicates an overall upward trend in these filings: according to the American Bankruptcy Institute, the 1.2 million filings that have taken place through October this year already surpasses the 1.1 million filings made in all of 2008. If you’re one of the many Americans considering this option, you might be wondering what scenarios would make filing for bankruptcy right for you. While there are many reasons to take this step, there are three particularly compelling reasons to join the ranks of those filing for bankruptcy.
1. You Owe More Than You Own
If your debt exceeds your assets to the extent that you cannot even make your minimum payments, filing for bankruptcy might be the right choice for you. In fact, you may have little choice left other than bankruptcy, particularly when your creditors are not willing to work with you to find another solution. While filing would not eliminate all of your debt, it would eliminate most of it. Hopefully, your income and assets would cover payments on the amount that’s left over. Though no one wants to become another of the many bankruptcies filed, in this situation filing for bankruptcy will most likely do more good than harm.
2. You Want to Keep Your House
Filing for Chapter 13 bankruptcy will usually allow you to keep your home. If you are behind on payments and your creditors are about to foreclose, this may be your best option for keeping your home. Though this filing will not erase the debt you owe on your mortgage, it offers you the chance to restructure your debt and payments in a way that will allow you to repay the amount you owe over the next 5 years. If there’s not another way for you to keep your home and keeping it outweighs the negative consequences that surround bankruptcy, filing for Chapter 13 would be a good choice for you.
3. You Can’t Negotiate a Repayment Plan
It’s rarely a good choice to file for bankruptcy before you’ve talked with your creditors and attempted negotiating a new payment plan. If you’ve done this, though, and one or more of them refuses to work with you, bankruptcy might be the only good choice you have left. Sometimes, creditors can’t afford to be paid over time and need a full payment sooner rather than later and simply aren’t in a position to negotiate. Other times, they just don’t want to work with you. Whatever their reasons, if they are holding fast to their position, filing for bankruptcy can help you escape them.
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