In today’s economy keeping a job can be difficult enough, let alone finding one if you were previously laid off. Although there are many jobs available, not all will provide the income needed to keep up with mortgage and other debt payments. As a result, some people have turned to filing for bankruptcy when their unemployment checks run out. However, this may not be the best idea and should be considered with caution.
Although bankruptcy is meant to be a helpful tool for those who cannot afford to repay their debts, there are some other ways to manage debt burdens with less procedural effort. Traditional debt negotiations and self-managed debt relief plans should be considered and tried before filing for bankruptcy. However, there are some exceptions to this general rule and issues to be considered.
First, consider the extent of your financial hardship. If you are expecting to be out of work for a long period of time or cannot gain employment enough to cover your expenses, bankruptcy could be the option for you. However, if you could work multiple jobs or supplement your income with savings, retirement funds or inheritance money, these may be way to help support your debt payments without the need for bankruptcy.
Second, consider the nature of your assets. If your assets are at risk of repossession or foreclosure bankruptcy is probably the better option, as it can quickly halt any liquidation proceedings while you work out a repayment plan. However, if you do not have any secured debts or own all of your assets outright, negotiating your debts directly could keep creditors away from these possessions without the need for court interference.
Last, remember that if you do file for bankruptcy and changes to your financial status could impact your case. For example, if you qualify for Chapter 7 protection based on your lack of income and you get a job down the road, you could be disqualified and have your case either converted to a Chapter 13 or dismissed altogether. An increase in income can also change what is required as part of your Chapter 13 repayment plan.