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It is important to know when to take the tough step of filing for bankruptcy.  Bankruptcy is meant to be a last-resort option but there are certain situations when filing may be your best bet.

The Hole is Getting Deeper

If your monthly budget leaves you short of being able to make all of your minimum payment on unsecured debts, first find out if you can qualify for payment reductions through a credit counseling agency, according to Michael Bovee, a debt negotiation expert and founder of Consumer Recovery Network. If the reduced monthly payments you quoted by a certified counselor are still out of reach, talk with a bankruptcy attorney about your options.

You’re Raiding your Retirement

When you raid your retirement funds you are not getting out of debt cheaply, you are stealing money from your 82-year-old self that will depend on that money to get by, warns Steve Rhode, founder of GetOutofDebt.org. There can be significant consequences to borrowing from the retirement funds instead of considering learning a lesson from bankruptcy and doing better moving forward.

Others will Suffer if you Do Not File

Credit.com writes that whether it is children, a disabled spouse, or an elderly parent, taking care of others financially in addition to trying to meet your own needs can quickly drain your resources. It doesn’t matter if you are female or male, if you are struggling with your debt and weighing your options, consider the number and age of people dependent on you and emergency fund to care for them if the unexpected happens. The larger the number of people dependent on the person sitting across from me, the more likely they need an emergency fund, health insurance, etc. rather than paying unsecured creditors.

You’re Being Sued by Debt Collectors

When you fail to make payments on a debt there’s a good chance that it will get turned over to a collection agency at some point. If the debt collector’s phone calls and letters go unanswered they may decide to file a lawsuit to try and force you to pay up. Fighting a debt collection lawsuit can be difficult and if you lose, you may end up owing even more in court costs and attorney fees.

While filing bankruptcy is not an easy decision, sometimes it is the necessary one. If your finances are spiraling out of control and you are raiding your retirements, forcing others to suffer, or being sued by debt collectors, it may be time to file for bankruptcy.