When you find yourself struggling to make headway against a large amount of debt, your options can become limited. You may only be able to choose between filing for bankruptcy or continuing to make payments in the hopes that your situation will improve. Choosing between these options will depend on a few factors. Here’s a closer look at how to make the best decision.

How to Choose Between Bankruptcy & Paying Down Your Debt

Are You Able to Repay Your Debts?

Since bankruptcy will damage your credit score for at least seven years, it’s often seen as a last resort for those with reasonable financial means. Even if you can only pay off a single credit card account at a time, this may be a better option than filing if you formulate a solid payment plan and stick to it. If you do make enough to pay down your debts, you may not even qualify for Chapter 7, and while you may qualify for Chapter 13, it’s possible that you’ll end up repaying so much that filing won’t benefit you.

Are You in Danger of a Lawsuit?

As you fall behind on your debts, you may start receiving harassing phone calls and letters from your creditors. Eventually, they will turn your accounts over to collection agencies, and if you still don’t pay, either the collection agency or your creditor may initiate a lawsuit against you. If this happens, it may be worthwhile to discuss your situation with an attorney. Failing to act may result in a garnishment of your wages.

Do You Own Real Estate? 

If you own multiple properties, you may not want to consider filing. With Chapter 7, the trustee will be authorized to sell your real estate and use the profits to pay off your creditors. If you file Chapter 13, meanwhile, you may be able to keep your property, but you’ll likely have to pay the equivalent of its value to your creditors. The only way to avoid this stipulation is if your property can be considered exempt under your state’s laws.

How Devastating Will Your Credit Score Be Affected?

By the time you consult a lawyer about your options, your credit score has probably already taken several hits, from falling behind on your payments to lawsuits that resulted in judgments against you. At this point, a bankruptcy on your credit profile will make your score only slightly worse, if it affects it at all. Furthermore, the process of rebuilding your credit after filing could bring about a more positive trajectory for your score in the future. Before you decide which route to take, check your credit report, dispute any errors, and determine where you feel your score would be with and without filing.

The Law Office of J. Baron Groshon has been providing bankruptcy and estate planning help to residents of Charlotte, Concord, Gastonia, and Lake Norman. If you’re in debt and want to explore your options with a professional, they’ll help provide you with the legal insight you can trust. To familiarize yourself with the firm’s services, visit their website. Set up an appointment for a consultation by calling (704) 342-2876.