When Should Bankruptcy Be Considered? Does it Make Financial Sense to Walk Away From Your Loans?


Home loans, car loans and other financial instruments are financial obligations that are entered upon freely and willingly by the participants and it is your duty to attempt to meet your terms of the bargain. This is a sound financial principle, and it shows both character and responsibility, but are there times when bankruptcy should be considered and it makes financial sense to walk away from your loans?

I would like to first be clear in this article, bankruptcy and walking away from your loans is a drastic measure with serious ramifications causing bad credit and will hinder your ability to achieve new credit for home loans or other purchase for years to come. Yet, in some the sense of debt relief and the freedom from upside down financial obligations that you have no hope of clearing otherwise can sometimes call for drastic considerations.

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Let us examine an example situation. Many have found themselves on the wrong side of the real estate bubble bust, especially in hyper markets such as California, with a home loan well beyond their houses current value on the resale market. These debts can skyrocket to well over a million dollars in a market that cannot support the sale of the asset for a third your loan. Couple that debt burden with an economy that has created income downsizing and layoffs in many fields, people find themselves with a debt burden that now seems impossible to surmount.

Maybe you bought beyond your means, or borrowed more than you should have. Maybe you life surprised you with the financial unexpected. Maybe you misjudged and your business was harder hit than you expected, or the market dried up. This is not the time to beat yourself up over past choices, but rather to take a sober, realistic assessment of your current financial profile, and take action based on today's circumstances and opportunities to move in a positive direction.

The debt relief provided by bankruptcy is a consideration of last resort, but bankruptcy is a tool that must never be left unconsidered. There are times when the bad credit ramifications are far outweighed by the debt relief bankruptcy can provide. The hardest part is leaving the emotions on the table, and examining the situation rationally, from a sound personal finance perspective, weighing the pros and cons.

In strange markets such as these we now face, sometimes it makes financial sense to walk away from your loans with bankruptcy, so you can start over. It is what the bankruptcy laws were designed for in this country, to provide consumers a second chance when they desperately need it. If the second chance of bankruptcy is just what you need to achieve debt relief, be sure to seek the counsel of a bankruptcy attorney in your state to best take advantage of the relief the law provides you.


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