The prospect of bankruptcy can be daunting for Texas residents who can not manage mounting debt. As a result, many people shy away from this step because they fear it will damage their credit.
However, these are three times when declaring bankruptcy may help you manage your debt and ultimately rebuild your credit.
1. When you experience long-term unemployment
Financial security depends upon maintaining a healthy debt to income ratio. However, long-term unemployment without an emergency fund can cause you to rely upon credit cards to meet your essential living expenses until you return to work. Unfortunately, an increasing principal and high-interest rates could make it impossible to satisfy even the minimum monthly payments.
2. When you experience a catastrophic illness
According to the American Journal of Public Health, excessive medical expenses are responsible for most bankruptcy filings in the United States. Also, a recent Kaiser Family Foundation survey reveals that Texas is home to more people without health insurance than any other state. If you can not pay your basic living expenses due to costly medical care, you may consider bankruptcy to relieve your financial burden.
3. When you go through a challenging divorce
Divorce is another leading cause of bankruptcy. The expense of paying for a divorce and supporting your lifestyle with a single income may lead you to rely more heavily on credit cards. In addition, if you are responsible for alimony or child support payments, you may not be able to keep up with your post-divorce expenses.
Filing for bankruptcy comes with pros and cons, but it is often the appropriate choice for relieving crushing debt and rebuilding financial security.