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.