Should You File Bankruptcy or Is There an Alternative?

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Sometimes people find themselves at a point where debt has crept up to the point it exceeds income. In the beginning, credit cards and “unnecessary” bills are neglected in favor of the essentials for everyday living. But when things snowball to the point it affects the necessities, the situation becomes dire. It’s at this point people begin to question whether or not bankruptcy is the only solution.

Declaring bankruptcy is always the last choice. It’s not an option for everyone and isn’t necessarily the right decision for some. Everyone is unique in their situation, but the reasons why people come to this conclusion as a way to clear debt is usually similar:

  • The minimum payments on monthly debts are a struggle to maintain or cannot be met.
  • The debt you pay out each month takes up a substantial portion of your income, leaving little to nothing left for living expenses.
  • You are being denied extended credit opportunities and are considering the potential of payday or cash advance loans.
  • Debt balances are not budging from month-to-month.
  • Creditor calls are relentless, and you’re having to juggle from one to the other each month to satisfy everyone. But it’s becoming impossible to maneuver.

It’s a matter of looking for the pros and cons of filing for bankruptcy in Oklahoma City compared to what the alternatives are for your particular situation. It’s possible to contact someone like OKC Bankruptcy Attorney Chris Mudd for a consultation to discuss the options and move forward from that point. There are also debt counselors who can provide you with choices for clearing your debt and help you to develop a preliminary plan for doing so.

How To Know If Personal Bankruptcy Is The Right Decision For You

Bankruptcy is a way for you to eliminate excess debt legally in an effort to start again with a clean slate. This has happened because you are insolvent, or you are unable to pay everything you owe with the income you make. Why bankruptcy might be an advantage in your type of situation.

  • Filing this type of claim gives you an automatic reprieve. Creditors receive a notice that any type of actions that were being taken against you should immediately cease. That includes attachments to your income along with collections and legal proceedings.
  • The “Bankruptcy and Insolvency Act” determines the terms and conditions for the administration of claims allowing all parties to be taken care of adequately. That means the payments that you make as set by the court will result in your debt elimination.
  • Unsecured debtors are the ones dealt with, including credit cards, taxes, unpaid bills, lines of credit, and payday or cash advances. Once you’re discharged, these are eliminated.

How To Know If Bankruptcy is Not The Right Choice

Some things won’t cure the root of the problem, as is the case with bankruptcy. If you have an underlying problem with overspending leading to excessive debt, filing this claim is not going to fix the problem. It might wipe your slate clean. But ultimately, you’ll end up right where you started because you are compulsive. Aside from that, some disadvantages come with bankruptcy that you might want to consider before taking that step:

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  • Secured debt is excluded from the proceedings such as car loans and mortgages, so if these are in default, forfeiture is still possible with the lien holders. Filing will take away all the unsecured debt leaving enough cash flow to make up missed payments to avoid forfeiture. Click to see how long this filing will affect your finances.
  • Non-exempt items will be seized after you’ve filed. Some exemptions will let you keep specific assets, including a majority of your furnishings, clothes, and a vehicle with a value of less than $7000. But if you are in possession of equity of a significant amount like in a home or potential investment, bankruptcy might be an option you might not want to consider.
  • “Surplus income” might be mandated if you make more than the federal government allowable limit. That could increase your ultimate costs for the claim and the duration of your bankruptcy. And if you have gone down this road before, a second time will last longer and cost much more.
  • Of course, making this declaration is going to affect your credit rating. Pull this link for myths concerning bankruptcy and credit scores. Filing this type of notice will automatically be placed on your credit report where it will stay for a six-year period after the file has been discharged. But also bad for a credit score are overuse, default payments, and bad loan decisions.

Ultimately making the decision to declare could be the first step in attempting to restore your credit so that you can begin from a financially stable place in the future.

There are alternatives for people who might not be as dire as having their income wholly devoured by debt. For those with smaller amounts of money due out each month with a decent flow of cash and good credit, consolidating might be a better choice than giving up entirely. This will only work if you don’t add more bills once you’ve consolidated the old into one, but instead, pay it down until it’s eliminated.

You also have the choice to work with your creditors in managing what you owe as a type of negotiation plan to repay all the debt at a set payment each month with “interest relief” set to be paid off within a specific period of time.

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A lot of creditors are eager to negotiate with consumers in order to get some kind of payment because they know the other option is to have to write it off following a declaration of bankruptcy. Many consumers merely avoid creditors because they’re unaware that you can genuinely speak to them, and they will develop a plan for you.

Final Thought

Figuring out precisely how to handle personal financial situations where your life circumstances are threatened can make anyone desperate. But it is crucial to stop and take a moment to think before you proceed with a final option. Speak with a debt counselor in Oklahoma City about options.

These programs are designed to provide you with the education you need on the various options available to you and what they will mean to your financial future. If bankruptcy is the only way to go, then that will be your recommendation. Sometimes a clean slate is just what it will take to set things right.

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