Bankruptcy is a great option when you are drowning in debt. There are many circumstances to consider before filing for bankruptcy. Meeting with an attorney is the best way to determine what the next course of action should be. However, we hope to provide you with some additional information to help you determine if bankruptcy is right for you.

So how can you be sure that it is a good time to file for bankruptcy? There are a few things to consider:

Have you tightened your household budget but still can’t get ahead?

Sometimes financial struggle comes from the fact that families don’t know where their money is going. Many times people fear knowing the numbers, but it is very important to realize what is coming in and what is going out. If you have reviewed your budget and cut expenses where you can and you still can’t make ends meet, you should consult with a bankruptcy attorney to see if that is a good fit. Bankruptcy can lessen payments to creditors, except for your primary mortgage on your home; therefore, you can often make your income go further toward your debt in a Chapter 13 repayment plan.

Have you tried to negotiate lower payments and interest rates, but can’t get creditors to understand?

Although rare, there are some creditors who will work with you and lower your overall balance, interest rate and/or monthly payments. Some credit unions or other creditors on car loans allow you to skip or defer one payment per year. If you have looked at these options and your creditors don’t or won’t help, then you should consider bankruptcy. In a repayment plan, Creditors actually have very little say over what payment they receive and it can most always lower the interest rate on secured loans. Unsecured loans, like credit cards, finance companies and medical bills are repaid at zero percent interest with no negotiation at all in chapter 13 or you might qualify for a Chapter 7 where unsecured debt is wiped out entirely.

Are you late on payments and borrow money to get you through until the next payday?

Are you more than one month behind on mortgage payments and/or car payments? Is credit the only way you are able to make day-to-day purchases like groceries? Do you borrow money from family, friends or cash advance stores to get you through to the next payday so that your check is already spent? You really can’t borrow your way out of debt so if that seems to be your circumstances, bankruptcy is likely a good option to stop the cycle of borrowing and never paying down your debt.

Have you suffered a loss of income or temporary increase in expenses and just can’t catch up?

If you have lost income for a period of time but are now back on your feet, you may be eligible to enter a Chapter 13 repayment plan to help you catch up on bills. If you are too far behind or have suffered a permanent pay cut or have medical or other issues, you may be able to file a Chapter 7 and wipe out all existing debt and receive a fresh start. Both options would be discussed at the initial consultation.

Have you attempted credit counseling or debt consolidation and you are still being sued by creditors?

We are bombarded with advertisements telling us their company can save us money, lower interest rates and eliminate debt, but who can you trust. Many people try debt consolidation companies and/or debt settlement companies only to find all of the money they are paying in is just going to “lawyer fees” for the company. Further, debt consolidation and debt settlement companies cannot force your creditors to work with them and these programs don’t stop collection lawsuits. If you have tried to eliminate or reduce debt through these programs and you are being sued or you aren’t seeing any progress, bankruptcy is a very good option. Even if you are in a program, you can stop the program and likely get more protection under Bankruptcy laws. Bankruptcy lawyers are closely monitored by the government and fees must be approved unlike the debt consolidation companies; therefore, bankruptcy almost always offers a more fair return on the money you invest.

If you answered yes to any of these questions, then you should schedule an appointment to discuss bankruptcy options. Bankruptcy can be a fresh start that will give you a new beginning to work on financial stability and budgeting to ensure that your financial future is secure.