When Should I File Bankruptcy?

If you are asking yourself the question, "Should I file bankruptcy?" you are not alone. According to bankruptcyaction.com, in 2010 there were over one and a half million bankruptcy cases filed. This figure is up over 8 percent higher than in 2009. This is a question that many Americans are asking during these times of financial despair.

Bankruptcy should certainly be your last-ditch effort. A bankruptcy lowers your credit score by hundreds of points and will remain on your credit report for 10 years. This article will shed some light and help you determine if you should file bankruptcy.

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There are some things to look at to help you determine if you can continue to tread water or if you are beginning to drown in debt.

The first suggestion would be to take a good hard look at the entire situation. So often, we set bills aside, hoping it will go away. Unfortunately, this doesn't happen and only escalates the situation. Spread all of your bills out on the kitchen table so you can see where you really are.

Make a list of all your debts, the amount due each month and the date they are due. Next, make a list of your income for each month. If this varies, use the lowest amount for each pay period to help ascertain the most realistic picture. Add to this list the dates you are paid.

If it appears you are able to make all your payments including utilities, mortgage, credit cards and loans you may be in good shape. If you have more coming in than going out but it is tight, you are probably in the position to keep treading water.

If this is the case, you may want to check into a non-profit credit counseling service. These services are able to combine your monthly bills into one slightly smaller payment to give you added breathing room.

Counseling services are also willing to contact your debtors and make special arrangements, sometimes lowering the monthly interest rates. There may or may not be a fee involved for their services. At least this would give you an answer of "No" to the question, "Should I file bankruptcy?"

If instead, you see the picture that you are paying out more than is coming in you may find yourself in the "beginning to drown" category. If you are only making minimum payments on credit card balances and find you are paying late fees or over balance fees, it may be time to file bankruptcy.

This would be a good time to contact a bankruptcy attorney. Most attorneys will give you a free consultation to help you make the final decision and help answer the question, "Should I file bankruptcy?"

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