Is personal bankruptcy the best option for mounting debt?

Many people in Connecticut face debt of one sort of another, but when does crushing debt get so serious that personal bankruptcy is a viable option? Many individuals and families do not know the answer to this question, but there are many professionals who can help advise them on this issue. Here are a few pieces of information people should consider when facing the possibility of personal bankruptcy.

The first thing to understand is how to file for personal bankruptcy. Typically, individuals will file for either Chapter 7 or Chapter 13. Filing fees amount to a few hundred dollars and attorney fees are also part of this undertaking, but most people will simply redirect debt repayment funds to pay these bankruptcy filing fees.

Many people do not want to consider bankruptcy as a possibility and do everything they can to avoid it, including tapping into 401(k) savings. These are often protected if a person files for bankruptcy, so losing them to put off the inevitable may not be the best strategy. This is especially true for those under 59.5 years old, who will face an early-withdrawal penalty of 10 percent when dipping into retirement accounts.

Often, a triggering event like a lawsuit from a creditor is what first causes people to consider personal bankruptcy as an option. While there are some serious consequences for filing for bankruptcy, such as a credit report hit, it still may be a good option for those facing larger debt loads. The best way to find out the best options under Connecticut bankruptcy law is to speak with an attorney about the particular case at hand.

Source: CNBC, “For some consumers, bankruptcy is the solution to crushing debt“, Sarah O’Brien, April 7, 2018