Summary: If you’re wondering whether bankruptcy will help you with your debt, you aren’t alone. There are plenty of reasons to consider bankruptcy or some type of debt settlement. But those reasons aren’t necessarily universal. There are, after all, some significant drawbacks to bankruptcy. It’s worth taking some time to think about all of the repercussions.
Will Bankruptcy Help Me With My Debt in the Long Run?
It’s the last place I have to turn. Will bankruptcy help me with my debt once and for all? It’s a situation that many Americans find themselves in, despite the strong economy. The Great Recession has left a lasting impact–and it’s still hard to get ahead, despite all of the messages we get on a daily basis telling us that we should be prospering.
That’s why many Americans have come to consider bankruptcy as one of the surest means out of debt. The real question is, does it work? Will bankruptcy actually help you get out of debt for good?
A truthful and honest answer is going to depend on your financial situation, your habits, and what your future holds.
What Caused Your Debt in the First Place?
You can start answer this question–will bankruptcy help me with my debt in the long run–by first looking to what caused your debt. Most people declare bankruptcy because the debt they face is overwhelming. What you need to figure out is this:
- Is your debt systemic? Sometimes debt is caused by a constant imbalance in your finances. If that imbalance exists month to month, then bankruptcy might not be the right move. Then again, sometimes that imbalance exists because of interest payments on debts–which bankruptcy can help with. But let’s put it this way: if you’re constantly incurring new debts, then bankruptcy might not be able to help you sort your finances out.
- Was your debt a one time event? According to debt settlement attorneys, there are many life events that cause someone to incur a sudden and significant amount of debt. Among the most common causes of this type of debt that bankruptcy attorneys see are medical reasons and divorce. Any time your life is suddenly changed, there’s the chance that you could incur too much debt for your finances to handle. In cases of this non-systemic debt, bankruptcy might be a solution that can bring about more long-term financial stability.
That’s not to say that bankruptcy is ever the perfect solution. There are certainly consequences that come with bankruptcy.
Bankruptcy: The Good and the Bad
Bankruptcy is indeed a way to deal with a lot of debt. But it’s by no means a perfect solution, as there are significant downsides to declaring bankruptcy. Most consumers will choose one of two different types of bankruptcy to file (which will have varying impacts on your debt and credit score). But here’s the idea: when you declare bankruptcy, you are negotiating with creditors–you’re saying that you can’t pay everything, but you might be able to pay a little. Or, simply, that you can’t pay anything.
Because of that, you do get relief from your current debts. But you are also seen, then, as a higher risk for future lending. This can make it more difficult to get car loans in the future, or secure a credit card. That type of mark on your credit will make it virtually impossible to secure a home loan for years to come.
The negative results of these bankruptcy agreements will generally last anywhere between 7-10 years, at least in terms of your credit report. If you’re thinking about a bankruptcy, you should be in a position to absorb that kind of dent against your credit.
Then again, you might not have a choice.
The Best of Some Bad Solutions
Bankruptcy can help you deal with a significant amount of debt (though, it should be noted, that you cannot eliminate your student loan debt through bankruptcy proceedings). But in many cases, it’s the best of a bad set of solutions. You should consider this type of solution carefully before proceeding.
Then again, it’s not like bankruptcy is going to be the end of your life. It’s a setback, financially. But it’s one that might end up paying off in the long run. Will bankruptcy help me with my debt? It could–especially when you have no other options.