In a struggling economy, it can be difficult to stay financially afloat when debt continues to increase and a debtor is facing foreclosure or losing assets. Although filing for bankruptcy is a difficult decision that has many repercussions, there are several red flags on when it’s time to start fresh and consider the option.
Using Credit Cards To Pay for Necessities
Although it’s common to use credit cards periodically each month, a red flag in any financial situation is when credit cards are used just so an individual can afford food, gas, and the basic necessities to survive. If someone is in such a lack that their credit cards are the only way they’re able to purchase products or services, then it may be time to throw in the towel and file for bankruptcy.
Daily Calls From Bill Collectors
If the debt amount is so high and payments are consistently late to lenders, resulting in daily phone calls from collectors, then it’s time to reconsider bankruptcy to regain financial standing and peace of mind. It can be difficult to have emotional stability with the constant reminder of unpaid debts.
Making Minimum Payments on Credit Cards
Bankruptcy is a viable solution for those who cannot afford to make more than the minimum amount required on their monthly credit card payments. When acquiring thousands of dollars of debt, the only way to pay it off in a realistic time frame is by paying more than the amount required by lenders. It can take a lifetime if paying just the minimum amount while also getting charged interest fees, meaning debt will continue to accumulate for a lifetime without any relief.
Behind in Mortgage and Tax Payments
For those who are not able to keep up on their mortgage and tax payments and have continued to fall behind for more than six months, Chapter 13 bankruptcy is the best option that works to protect any co-signers involved and restore the financial situation.
You’ve Attempted to Negotiate
For many people who are in debt, financial counselors often advise debtors to ask creditors for easier payment plans that are more realistic for your financial situation instead of paying a full amount. If these attempts at negotiating have been unsuccessful, then bankruptcy is the only other option that will work to protect your future and provide a chance of gaining a firm financial standing again.
Liabilities Exceed Assets
The most common reasons people file for bankruptcy is that both their assets and income are not enough to pay off hundreds of thousands of dollars of debt to a lender, meaning the situation has few solutions and essentially has no end in sight. If the amount of debt is astronomical and there’s not a chance of the debtor’s income increasing, then bankruptcy will work to eliminate all debt with consequences that are in a shorter time frame than attempting to pay off the debt over several decades.