What can you do when you're out of work for months, are too ill to work or are faced with a catastrophic illness and have no health insurance? You may qualify for assistance through consumer credit counseling programs if you have sufficient income for making minimum payments as arranged by the credit counseling agency.
In some cases, however, it's possible to be faced with insurmountable bills with no hope of being able to pay them. Although filing bankruptcy seriously damages your credit scores, it does provide protection from debt that you cannot repay. Here are three common reasons for taking the fateful step:
- Long-term unemployment: If you cannot find work, filing bankruptcy can eliminate credit card debt, signature loans, and unsecured lines of credit. If you have a mortgage loan or other secured loans, you'll be required to reaffirm and remain responsible for paying such debts outside of the bankruptcy. Filing bankruptcy can free up funds for meeting essential living expenses when your income is seriously reduced.
- Insurmountable medical bills: Those who are uninsured or under-insured can easily find it impossible to pay for medical expenses. Serious illnesses or injuries are catastrophic for families who have no hope of paying tens of thousands of dollars in medical bills. Attempt to negotiate settlement with medical creditors, but contact a bankruptcy attorney if you cannot make affordable repayment arrangements.
- Permanent disability: If you cannot work, living on a reduced income may be impossible if you're carrying credit card debt and other bills. When transitioning to disability income, consider discussing your circumstances with a financial advisor for finding your best debt help and debt relief options.
Considering debt relief options and seeking debt help before filing bankruptcy are vital in ensuring that bankruptcy is the best debt solution for your situation.
About the Author:
Karen Lawson is a freelance writer with 20 years of experience in mortgage banking, mortgage loan servicing and home loan loss mitigation programs. She holds B.A. and M.A. degrees in English from the University of Nevada, Reno.