Everyone knows bankruptcy is a last resort option for getting out of debt. Its impact on your creditworthiness affects not only the financial aspects of your life, but can interfere with your ability to get a job, insurance, and even an apartment or home. In general, bankruptcy is viewed negatively, and for those in financial jeopardy, there is always the understandable fear of being stigmatized forever.


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However, bankruptcy exists for a reason — to help those who truly need debt relief. Not to be taken lightly, applying for bankruptcy is reserved for those who have been so severely hindered by their spending that they have no way of repaying it, and no alternate options.

You’ve gone to counseling

To even apply for bankruptcy, you are required to get credit counseling from a government-approved organization with an accredited counselor who helps you assess your personal financial situation. You are walked through all your options for debt relief, including bankruptcy, a modified payment/debt management plan, and debt consolidation.

Sessions can be held online, in person or over the phone, and counselors work with you to help you create a budget and a personalized plan for tackling your problems. If they have reviewed your finances and treat bankruptcy as a viable option for you, there is a likelihood that your circumstances are dire enough to merit applying for insolvency.

You’ve weighed the other options

You’ve weighed the other options and none of them feel applicable to you. For example, you may be able to lower the cost of your debt by consolidating it through a second mortgage or a home equity line of credit, but this strategy requires you to put up your home as collateral for the loan, meaning you could lose your home. Additionally, consolidation loans such as these come with a cost.

Another option you may have considered is debt settlement, however, many of these programs mandate that you make monthly deposits to a special savings account for 36 months in order for all your debts to be settled, which many individuals often cannot sustain for such a long period of time. Your credit counselor should be able to give you their professional insight as to how well these methods may work for your needs, lifestyle, and payment abilities.

In the end, you may just want to stop accruing late fees and penalties, and want to start fresh. Bankruptcy can help you do that, though it is a legal court procedure that will stay on your credit report for ten years (if you file for Chapter 7). (Continued on page 2)

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