Incurring large amounts of debt is a common occurrence in today’s world. The high price of vehicles, credit card availability and the prevalence of uncovered medical expenses make it easy to slip into a situation in which you are no longer able to the pay off your debt. Bankruptcy offers a legal method of discharging your debts and starting over. However, this legal recourse is not always the right solution. Here are a few times when bankruptcy may be the right option for your needs.

You're Overwhelmed By Debt

Individuals may find themselves coming to a point where they cannot possibly find the money to pay it off. The constant debt collection calls become a burden to their lives, and they feel emotionally stressed and overwhelmed. They may have gone into credit counseling, without success. At these times, bankruptcy may be the only option back to financial stability.

Much of Your Debt is Unsecured Debt

Unsecured debt is a financial obligation that does not have a specific asset as collateral for the money. This type of debt generally includes payments for department store credit cards, utility bills, personal loans that do not name property as collateral, student loans, medical expenses and other types of debt. Creditors cannot seize property to pay off these debts, without going through a legal process to gain control of them.

You Can Manage the Consequences

A bankruptcy proceeding will affect your credit rating for up to 10 years, so you should carefully consider whether you can sustain limited availability to credit during the time. Of course, late payment on your debts will also affect the ability to get credit, so you should consider your individual situation carefully.

You’re Using Your Retirement Funds

Retirement funds are generally exempted from bankruptcy proceedings if they are in a legally defined financial vehicle, such as an IRA, Keogh account, 401K or pension benefit. If you find you are withdrawing money as a rapid rate from these types of funds, it will be to your benefit to choose bankruptcy to discharge your debts, instead of continuing to reduce money that will be available to you when you retire.

Bankruptcy can be a reasonable choice for individuals who find themselves overwhelmed by debt. The Gil Law Firm can help you consider carefully whether bankruptcy is the best option for your needs. These tips can help you to decide whether going through bankruptcy proceedings is the best method for helping you to return to financial stability.

Author's Bio: 

Rachelle Wilber is a freelance writer living in the San Diego, California area. She graduated from San Diego State University with her Bachelor's Degree in Journalism and Media Studies. She tries to find an interest in all topics and themes, which prompts her writing. When she isn't on her porch writing in the sun, you can find her shopping, at the beach, or at the gym. Follow her on Twitter and Facebook: @RachelleWilber;