Debt has a way of taking over your life (if you let it). One minute you’re doing fine and the next thing you know, the calls won’t stop coming, your wages are being garnished, and the interest keeps piling up. When debt has reached an excessive point, one can only wonder if it’s time to file for bankruptcy. Both chapter 7 and chapter 13 bankruptcy filings offer some respite from the never-ending amount of debt. With that being said, one must consider all aspects before determining if filing is right for them.
Signs You May Want to File
Not sure if you should file bankruptcy or keep plugging away at your mountain of debt? Below are a few instances in which filing may be your best option:
- You Have More Money Going Out Than Coming In – There can be plenty of reasons that your household income has taken a plummet (especially in this economy). Maybe you’ve gotten a divorce, lost a job, or have been out on medical leave. In any event, if you’ve reached a point that you don’t have enough monthly income to cover your necessary living expenses and minimum debt payments then filing bankruptcy may be your only option.
- Your Minimum Payments Aren’t Doing Anything for the Balance Due – High interest rates can cause debt to skyrocket in just 30 days. If you’ve gotten to the point that the minimum payments you’re making aren’t even scratching the surface of your principal balance, it may be time to consider other solutions for getting yourself out of debt.
- You’re Behind on Mortgage Payments (Facing Foreclosure) – If your debts have caused you to fall behind on your mortgage payments, eventually this can lead to foreclosure. According to the Doan Law firm, bankruptcy may be able to help you keep your home.
- You’re Facing Repossession – When you’re seriously behind on your car payments, your loan provider will start the process of repossession. If you’re unable to negotiate new payment terms, bankruptcy ma
- You Have Several Pending or Active Judgements/Wage Garnishments – Having your wages garnished by as much as 25% (varies by state) can be a significant blow to your budget. This in turn could cause you to fall behind in other bills creating a web of debt. At this point, bankruptcy should be considered to prevent falling further behind.
- You’ve Considered Dipping Into Your Retirement – It may seem logical at the time as a quick fix for your debts, however, using funds that were to be preserved for your future is not necessarily the best option. Not only are you pulling from funds saved for your retirement, but you’re also incurring a lot of fees from early withdraw and taxes.
- You’re Currently Using Credit to Pay Off Debt – Often when people fall behind on their bills, they will use credit as a method for fixing the problem. While this does satisfy an immediate need, it will begin to accumulate over time.
- You Currently Owe the IRS – Owing back taxes can take a huge toll on your household finances. If you currently owe the IRS and cannot afford to keep the payments, filing for bankruptcy can provide some relief.
Consult with a Professional
Though all of the circumstances described above can come to some resolve by filing bankruptcy, it is still best to consult with a professional. Many opt to talk with a bankruptcy attorney to find out what their options are. Attorneys have the legal background and experience to guide you in the right direction. Should they determine that your circumstances are best suited with a bankruptcy filing, they are the best equipped to help you through the filing process. Be sure to only work with legal professionals who have experience with bankruptcy laws in your state.
The financial and emotional stress of debt can become overwhelming. If you’ve tried other alternatives with little or no success you should consider the possibility of filing bankruptcy. Not only can bankruptcy eliminate or minimize your debts while helping you to retain your assets, in time it can also help you to restore your credit and reclaim your life.
Nice article Pauline! If not controlled, debt can quickly become a major issue. I always like to keep an emergency fund to help just in case…
Thank you for your thoughts,yes we all know that bankruptcy is not that really easy to come up but just encase of settlement about personal debt i think bankruptcy is the best solution.
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Thank you for sharing this. It really is important to know when to consider bankruptcy. All of these different points really are tight financial positions, and you shouldn’t consider them lightly. Plus, your tip on consulting with a professional is very true. They will be able to honestly tell you the best way to get out of a tight spot.
Correct Delores, knowing all the details when considering bankruptcy is important. They are incredibly important decisions, and there are many things to take into account. My wife and I have been thinking about this lately. We are consulting with my friend to figure out what would be best for us.
Thanks for all the signs of bankrupcy that I should look for. I know that it is gonna be an important thing to be aware of if it ever happens. Right now I am doing great, but this information is really good to have. http://www.attorneyjoseph.com/Areas_of_Practice_Divorce_Attorney_Erie_PA.html
I am at that point with my debt where my minimum payments almost seem to keep my debt static. It doesn’t go up or down. With my current employment situation, I cannot make higher minimum payments. Would I need the total debt amount to be a certain level before I am even allowed to consider bankruptcy?
Habitually, bankruptcy is thought of as a bad move, but that isn’t always the case. As outlined above, there are certain circumstances that can actually make deciding to declare bankruptcy more beneficial to you than forgoing doing so, such as having more debt owed to the IRS than you can pay back. While it can be helpful do choose bankruptcy, it’s wise to always consider every option and the effects of those options before deciding, which can often require the help of a professional. Either way, I appreciate the honesty and candor of this post, since it can help people who are scared of bankruptcy more aware of its benefits.
The first sign listed, spending a lot more than your making, is important to see. If you aren’t keeping track of where your money goes, you should start. You may find that you can cut off a few spending strings if you need too.
Indeed! When debt is ahead of you, bankruptcy is a thing to give attention to. Thanks for sharing some tips, Pauline!
I have been having troubles with debt for quite some time, so it is really helpful to get this advice. Right now, I am facing repossession, and I am really concerned about them taking my car. I don’t know if I will be able to pay my loan by the deadline that they set, so it might be best to just file for bankruptcy. That way, I may be able to get it all worked out so that I can keep my car!
I agree with you that bankruptcy might be the best option for some people in a lot of debt. I like how you mention that you should file for bankruptcy if you are considering dipping into your retirement funds. That’s when you know it’s serious. I think everyone should talk with a professional before filing bankruptcy for any reason.
I think that these are some good reasons to consider declaring bankruptcy. Like you said, if you have more money going out than coming in, it will be extremely difficult to get on top of your debt. Clearing the slate if you can’t even begin to tackle your debt may be the best option in some cases. Thanks for the article.
Great advice for when you should think about filing for bankruptcy. It’s important to think about your situation as soon as you notice issues so that you can stay ahead of trouble.
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I think, when it comes down to it, the best thing you can do is ask a professional. Like you said, bankruptcy attorneys have been dealing with situations like yours for a long time, and they can help you know what your options are. At the very least, you can gain more knowledge on bankruptcy by talking to someone that knows. My brother is actually looking to file for bankruptcy, so this is something that he is trying. I will pass on this information and see if it helps him.
Thanks for talking about the signs it may be good to file for bankruptcy. It can be so difficult to decide what to do when you are in that situation — my sister is dealing with it right now, and she doesn’t know what to do. I think the sign you mentioned about your income being lower than your spending is a really important one. You don’t want to let it go too long like that, so bankruptcy might be the only way out for you. I think another great way to tell is by talking with a bankruptcy attorney. They have a lot of experience dealing with cases of people just like you, so they most likely have a valuable opinion on what options you have.
This was such an informative read! Thanks for laying out some of the warning signs. Filing for bankruptcy is such a big, long-term decision.
Awesome post! Definitely some great tips and advice to keep in mind. Thanks for sharing!