Categories

When times are troubles in the stock market, many people begin to look at their own personal finances – and they don't like what they see. As stocks fluctuate, interest rates can fluctuate, leading to higher payments for loans, mortgages, and credit cards. People begin to recognize that they are coming perilously close to losing their homes and to not being able to feel their families. If you add in a medical emergency which isn't covered by insurance, this bump in the road becomes a financial nightmare. But is the only option to dig yourself out bankruptcy?

What Bankruptcy Is

Bankruptcy is a legal process in which you file a claim to the government, stating you can not pay your outstanding bills. You will need a lawyer to help you file this motion or you can file these legal papers on your own. You will need to show that you have tried to pay down your bills on your own and you must show you don’t have enough assets with which to complete your obligations to creditors. Once you have established this, the bankruptcy will be granted and some of your balances will be deleted from your financial responsibilities. Note, not all of your bills will be taken away – alimony, child support, and some loans may still require you continue to make payments. The main concern with bankruptcy is that it stays on your record for up to 10 years. Each time you need to show your credit history to someone (for a loan or for a rental agreement), this will show up and it can lead to higher interest rates and even denials of applications. Bankruptcy can only be filed every seven years and it is a last resort, not a way to make your bills go away.

Do You Need to File?

Ideally, you should be looking at your finances long before you realize you have no other choice but to file for bankruptcy. You should see that you need to make changes in your budget that will allow you to avoid this legal step. You can start to avoid this process by talking to the creditors with whom you have past due bills. Talk to them about making other arrangements to pay things down. In today's market, creditors are more likely to work with you as they want to receive the money owed to them, even if it is on a slower timeframe. You will also want to cut out unnecessary expenses in order to save more money toward paying down the bills you have past due. Get rid of all of the extras you can afford to get rid of – even selling extra cars will help in these dire circumstances. Think about all the car insurance, gas, and maintenance costs you can save! You might also want to think about selling your home and moving to a small apartment for a while. If you've cut out all you can and negotiated with your creditors all you can, and you're still behind on your payments, then it's time to think about bankruptcy. This way, you can get the fresh start you need and you can get on with your life. While there will be a black mark on your credit rating for a while, having the chance to rebuild your finances without the threat of losing a home is a much better way to live.