The personal bankruptcy option

Decide whether or not
personal bankruptcy is the best way or not

When should you consider personal bankruptcy? Is it for you?

Personal bankruptcy exists, and it is legal. It's there for a reason, with certain specific qualifications. Walking away from debts without paying may be attractive to some, and disturbing to others. Are there situations when personal bankruptcy is the ethical and prudent thing to do? Yes.

The Ethical Challenge of Personal Bankruptcy

Put plainly, not paying back money that you owe feels a lot like stealing. That right there is the reason that personal bankruptcy should be the choice of last resort. It is not psychologically healthful to feel that we are behaving unethically. Paying bills that we owe actually feels good, or at least it should.

On the other hand, taking food out of someone's children's mouth in order to collect the debt is also ethically repugnant. A person who has fallen into poverty, despite his best efforts to support himself, becomes someone whom society should help. At the end of the day, human dignity and human life must remain the highest values.

In some circumstances, then, using bankruptcy laws to protect you and your family's basic needs – food, clothing, shelter, mobility and ability to get a job – is the more ethical choice.

The Advantages of Personal Bankruptcy

Having multiple debts canceled enables you to use your limited resources for the most important things. Food, clothing, shelter top the list. Declaring bankruptcy may free up the funds for you to continue paying your mortgage and not be forced out of your home. Additionally, enabling you to search for employment and new sources of income so you can go back to supporting yourself, are among the basic reasons this institution of bankruptcy exists.

It is also a basic human right to not be harassed. Through bankruptcy, the time and emotional energy spent dealing with impatient, and sometimes threatening, creditors, is saved and your dignity is restored.

The Disadvantages of Personal Bankruptcy

There are lots of downsides to this. First and foremost, your credit rating takes a big hit. You will find it difficult, if not impossible, to open up new lines of credit. Credit cards, bank accounts, new loans, all will either not be available to you, or be available at unreasonable cost. A person who has declared personal bankruptcy is not a good risk, and lenders will not be there for you.

Personal bankruptcy damages your reputation. Employers often check credit reports before hiring. They gain an insight into the prospective employees level of responsibility. A bankruptcy on your record might prevent you from getting the job you need.

The Process of Declaring Personal Bankruptcy

There are specific eligibility requirements for declaring personal bankruptcy.

• Your income and its relationship to your debt must be evaluated. How you compare to others in similar situations is part of the equation. These evaluations are done with a financial counselor with legal expertise.
• You must also go through a credit counseling educational session before you can declare bankruptcy. Each state has approved counselors that you can go to for this.
• Bankruptcy is done through legal representation.

Alternatives to Personal Bankruptcy

A much easier and less damaging process is debt reduction. This involves negotiating with creditors to reduce the amount that you owe them. They will prefer to get something rather than nothing, and may dramatically reduce the amount of debt you have. If that will enable you to ensure your basic necessities and ability to pull yourself out of your slump, it is a better solution.