Bankruptcy is no doubt a scary word and one that everyone wants to avoid. How the media portrays the word has certainly fueled the fear that it provides people. “A business giant went from bedrock to bedrock”. News like these makes people avoid bankruptcy and make them fall into more debt. That is why it is important to know when you should declare bankruptcy.
So, what is the answer to that question? Well, that is what you will be getting today, you just have to keep reading. You will have all the answers about bankruptcy by the end of the article. Here is a guide to the basics of bankruptcy.
When should you file bankruptcy?
Starting with the most important question of all. When is the right time to throw in the towel and file for bankruptcy? There are a lot of factors that one should take into account, before filing for bankruptcy. First of all, you need to stop ignoring your financial situation and get an assessment. Here’s how you can do it yourself. Ask yourself these questions to figure out if you’re in the danger zone:
- Are you making only minimum payments on your credit cards?
- Bill collectors are pestering you on a daily basis?
- Are you ignoring your financial situation as you’re scared to assess it?
- Are your credit cards being used for paying for necessities?
- Are you considering debt consolidation as an option?
- You are unsure about how much debt you’re in?
If the answer is yes to more than two of the above questions, then you need to get your financial situation on track as soon as possible. Even if you’re not bankrupt now, you sure are just a few steps away. Bankruptcy should be declared when you’re in a situation where you owe more than you can pay.
How to figure out your financial situation?
We are getting technical in this section. A person’s total value is the combination of all the assets that he owns at that moment. So, to determine where you stand financially, you need to inventory all your liquid assets. Liquid assets are assets that can be converted into money in a short amount of time.
You need to include every asset that you can to find how much you’re worth financially. This includes any retirement funds, stocks, bonds, vehicles you have, saving accounts for college, any real estate, and all the other non-bank account funds. Add the value of all these assets and you’ll have a rough idea of where you stand right now.
Half of the job is done at this point. Now you need to calculate how much you owe. Collect and add up all your pending bills and credit statements. If this value is greater than the value of your assets, then you can try and file for bankruptcy.
While bankruptcy is a scary situation, you can’t run from it forever. You need financial facts and file for bankruptcy. This way you will be saving both your creditors and yourself.
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