If you think you qualify for personal bankruptcy, but are still on the fence about filing, consider an important commentary by Michael Casey published in the The Wall Street Journal‘s MoneyWatch this week. The gist of it: Americans are fortunate in that we have an effective system in place to forgive debt so we can move on and make another go of it. Doing so not only benefits the individual, but also an economy that benefits far more from those rebuilding their financial lives after a bankruptcy than from someone who cannot afford to pay off their debt, and never will. Europeans, for example, are not so fortunate, as it is comparatively difficult to successfully file for bankruptcy in the euro zone.
For example, Casey writes:
While American households have used mortgage defaults to cut their total outstanding debt levels by more than $1 trillion since the crisis in 2008, household debt in the euro zone hasn’t fallen at all. And that means that European consumers will take a lot longer than their American counterparts to start to grow their spending again.
Of course, bankruptcy is not a decision to be entered into lightly. It will weigh heavy on your credit report for up to 7 years after filing. So it should be reserved only for those who are drowning in debt that is negatively and dramatically affecting your quality of life, with no foreseeable end in sight. Either way, it is important to explore your other options first.
Before filing for bankruptcy, you may want to try:
- Reducing your other expenses while you pay off your debt
- Negotiating with creditors
- Entering into a payment plan through Consumer Credit Counseling Services
If none of these alternatives turn up practical, positive results, bankruptcy may, indeed, be your best bet.
To help you decide if bankruptcy is right for you, do your homework first. If you haven’t already, determine whether you qualify. Beyond that, decide between chapter 7 or chapter 13 bankruptcy, as each comes with a different set of consequences and expectations.