Personal Bankruptcy – When to Consider It

Struggling with your finances is one thing. We all get those credit card bills that we struggle to pay off each month or a mortgage repayment that goes out late every now and again. However, the level of debt you need to have to even consider personal bankruptcy is huge.

The rule of thumb for deciding whether you need to think about personal bankruptcy is can you possibly do something to avoid the procedure? Can you reduce you monthly outgoings by doing without certain things, allowing you to spend more money on paying off your debts? Can you sell your house and car or downgrade to free up some extra money? Can you ask your creditors if some kind of agreement or repayment plan can be reached? All of these things need to be considered because a personal bankruptcy puts a serious black mark against your name.

Government legislation has changed the way many people look at bankruptcy with some seeing it as an easy way out of financial hardship. Yes, it’s easier to declare yourself bankrupt these days and yes, you could be discharged from your bankrupt status after a year or less. However, the same drawbacks still apply to a bankruptcy. You can expect to have you home, car and other assets liquidated in order to pay off the debts you’ve built up. You’ll find it near impossible to get credit while your bankrupt and things won’t get much easier for a long time to come afterwards. That black mark against your name will stick with you in some capacity for the rest of your life.

The major alternative to a personal bankruptcy is the IVA or Individual Voluntary Arrangement. This is an agreement between yourself and the creditors you owe money to. It’s a straightforward procedure and you can keep your home and other assets. However, an IVA won’t work for everyone because it still relies on the fact that you can afford to make some repayments. If you’ve lost your job or are unable to work then it’s likely you won’t get an IVA approved, leaving bankruptcy as your only option. However, if you’re struggling with insurmountable debt, then look into an IVA. Remember though, an IVA is still an insolvency albeit a slightly more preferable one than bankruptcy.

If you’re up to your eyeballs in debt and considering a personal bankruptcy then make sure you do your homework first. Analyse your outgoings against what you have coming in. Look at bank statements and see if there’s anyway you can balance the books more in your favour. Pick up the phone and ask your bank and your creditors for help. If you tell them you’re considering bankruptcy, they’ll listen to your problems because if you do end up having to take the procedure they won’t get their money back in full. It benefits them to arrange a repayment plan you can stick to. Don’t expect miracles but the agreement you arrange might be enough to save you from bankruptcy.

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