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When should I file for bankruptcy?

On Behalf of | Jun 21, 2024 | Bankruptcy

Paying off a debt can lead to significant financial challenges. Failing to pay what you owe on time and in full may even lead to bankruptcy.

While declaring bankruptcy may help if you have taken on considerable debt, it comes with long-term consequences. If you are wondering if it is the right time to file, here is what you need to know.

When to declare bankruptcy

Generally, the appropriate time to file for bankruptcy is after you have tried all possible debt management options but still need more to pay what you owe.

For example, you have large debts you cannot pay in full and miss your mortgage payments. Moreover, you are receiving nonstop calls from creditors and are in danger of foreclosure.

If this is the case, it might be the time to declare bankruptcy to reduce debts, prevent foreclosure and appease bill collectors.

However, as mentioned before, taking this step has serious financial consequences. In South Carolina, credit bureaus report this information for ten years after your declaration. This action damages your credit score, which impacts your ability to loan money in the future.

Bankruptcy as a last resort

If you have exhausted all your alternatives, it might be time to file for bankruptcy. However, you must be prepared for the negative consequences because your credit will take a hit even several years after the incident.

Bankruptcy filings are also available to the public, meaning if you agree to a background check, your employer may see them. They may even discover your credit report and score.

That said, the damage to your credit is not permanent, and you can always build your credit score after you file as long as you avoid incurring more debt.