Bankruptcy gets a bad rap in the press. Always has. Always will. But there are some good reasons to file bankruptcy.
Critics would have you believe that people who file bankruptcy intentionally max out their credit cards on luxury items, then file bankruptcy so they don’t have to pay anything back. While that undoubtedly occurs in a few cases, most bankruptcies are filed by hard-working individuals who have gotten in over their heads or had a run of bad luck. Sometimes it’s their fault; often it’s not.
Here are a few good reasons people file bankruptcy:
• Job loss
• Uninsured medical bills
• Business failure
• Automobile accident or other injury (whether or not you were at fault, if insurance does not cover everything, the balance is probably dischargeable)
• Tax debt (some tax debt is dischargeable, but not all)
• Student loans (you’ll have to demonstrate hardship to discharge some or all of your student loans)
• Inflation or insufficient income (at the end of the day, this is always the case, for one reason or another).
These are some good reasons to file bankruptcy, but watch out for the pitfalls. The biggest pitfall, of course, is the hit that your credit rating will take as soon as you file. But if you’re deep enough in debt to file bankruptcy, your credit rating is probably pretty low already. For most people, the fresh start that bankruptcy gives them can be an opportunity to start rebuilding their credit. Once you’re not juggling credit card payments, you can start living within your means and begin making payments on time.