If you are like many Americans, you may think of bankruptcy as an absolute last resort. You may feel that filing is a sign of personal failure, and you may worry that doing so will mean losing everything you have worked so hard for.
However, if you are struggling with overwhelming debt, bankruptcy may be a healthier financial choice than continuing to fall further behind. In fact, financial analysts have found that only a small number of U.S. families who might benefit from liquidating or restructuring their debt do so each year.
1. Filing for bankruptcy is irresponsible
For many Americans, filing for bankruptcy is the result of an unexpected and unpreventable event. From a job loss to an illness or injury that involves overwhelming medical bills, there are many reasons that otherwise financially responsible individuals may need relief.
2. Bankruptcy means losing everything
Federal and state laws may protect many of your most essential assets during bankruptcy through property exemptions. Common exemptions include necessary trade or employment items like a vehicle or professional tools, valuable personal property like jewelry and family heirlooms and equity in your home.
3. Your credit score will never recover
Bankruptcy may certainly impact your credit report for a few years. However, by eliminating and/or making your debt more manageable, you may be much more likely to build and maintain a strong credit score going forward. According to the Consumer Financial Protection Bureau, the majority of Americans who sought either chapter 7 or 13 bankruptcy managed to steadily build their credit score in the years immediately after filing.
Too often families continue to carry burdensome debt when there may be a better option. If you are ready to tackle your overwhelming financial obligations, you may want to consider how bankruptcy may help.