How to know if bankruptcy is the right choice

On Behalf of | Jun 25, 2019 | Uncategorized |

Bankruptcy has a stigma attached to it. However, it is often a beneficial process for people in Colorado to use when debt becomes too much to handle. The state of Colorado offers services to help people get their finances back on track, such as credit counseling and means test information. 

Before going through with bankruptcy proceedings, many people wonder if it is truly the best course of action to take. People thinking about pursuing this should consider the following points so that they can go into it with peace of mind. 

The situation will not improve in the near future

If people believe their financial hardship is temporary, then it may be best to wait it out. Perhaps they have a large inheritance coming in the near future, or they expect to get a big promotion at work soon. However, if there is no foreseeable way for a situation to improve in the next year or so, then bankruptcy may be the best option. 

The potential downsides of bankruptcy are clear

Before individuals go through with bankruptcy, the court will require them to undergo credit counseling. They can take these specialized classes either in person or online, but either way, they will learn about what bankruptcy will do for them and how it will impact their credit rating in the years to come. A bankruptcy notation will remain on a credit report for 10 years, so a person has to be comfortable with that before going any further. 

Most of the debt is unsecured

Not all debts can go away with bankruptcy. For example, taxes, back child support and student loan debt cannot be discharged through bankruptcy. However, bankruptcy can help with other unsecured debts such as medical bills and credit card debt. It may be that reducing the number of monthly payments a person owes will allow him or her to make larger payments on those debts that the bankruptcy will not discharge.