Life is unpredictable and dealing with debt is stressful. Even when you do your best to manage bills and make ends meet, sometimes it just isn’t enough. If you’re losing sleep over compiling debt, or afraid to answer your phone due to creditors or collection agencies calling to ask about overdue bills, and you’re left with little to nothing at the end of the month, it’s time to consider filing for bankruptcy.
Bankruptcy is often viewed only as a last resort; however, that is simply not the case. Bankruptcy laws were written to give people a second chance, not to punish them. While the thought of filing for bankruptcy can be daunting, it can be your path to a new beginning and financial peace. As you evaluate your debt and next steps, here’s 10 signs of when you should consider filing bankruptcy.
1. You are facing foreclosure on your home.
Home, or having a safe place to live, is essential. If you’ve fallen behind on your monthly mortgage payments, it can be difficult to recover and overcome quickly enough to save it – especially if you have other debts. Depending on your situation, filing for bankruptcy can either stop foreclosure or buy you and your family more time. If filled early enough in the foreclosure process, the automatic stay will temporarily stop the foreclosure. If you are facing foreclosure soon, bankruptcy may be able to save you, but it’s essential to act quickly.
2. You’re considering taking out a home equity loan to combat debt.
When you’re trying to wrangle large amounts of credit debt, a home equity loan can sound like a good idea; however, this can hurt you in the long run, especially if you continue to miss payments or add to additional debt. Because your house is the collateral against the loan, a home equity loan can also put you at risk of foreclosure if you fall behind on payments. This can be especially tricky if you experience unemployment, a medical emergency, or another unexpected issue affecting your income.
When in doubt, avoid taking on additional debts if you’re struggling with overcoming debt. If you have already taken out a home equity loan, and it didn’t help your situation–bankruptcy can be a fresh start.
3. You’re not making enough money to pay debts.
Are you having trouble paying debts while also having enough money for essentials like food, shelter, and transportation each month? This can, of course, be a stressful situation. Missing monthly payments can lead to late fees and additional interest charges, digging you even deeper into debt. If you find yourself in this situation, bankruptcy can help you find financial peace.
4. Your vehicle is threatened with repossession.
Your vehicle is probably your lifeline. It’s how you get to work, take your kids to school, attend medical appointments, and any other important functions in your day-to-day life. So, if you’ve fallen behind on payments, it can be a difficult challenge to overcome. If you do nothing or do not have the funds to make-up missed payments, your lender may repossess your vehicle. If your vehicle is threatened with this, and you are tired of fighting overwhelming payments, bankruptcy can be your solution.
5. The Internal Revenue Service is threatening to seize your bank account, wages, or other assets.
While owing back taxes can be intimidating, there are steps you can take to regain control. If you are being contacted by the IRS, and they are threatening to seize your bank records or income due to unpaid tax debt, you might want to consider declaring bankruptcy. A filling may be able to pause enforcement activities against your unpaid state and/or federal tax debts. Depending on your situation, some tax debts can even be included in your Chapter 13 bankruptcy repayment plan.
6. Creditors are harassing you.
This is an obvious sign that your debts have gotten out of control. Don’t take it personally; however, it’s important to take steps to alleviate this stressor in your life. (And we don’t mean blocking the calls and avoiding the situation). The best way to stop creditors from harassing you is to stop them in their tracks with a bankruptcy filing. When you declare bankruptcy, the automatic stay prevents creditors from contacting you regarding unpaid debts.
7. Credit cards are used for basic necessities.
Credit cards are great for building credit if you have the necessary funds to pay them off each month or in case of an emergency. If you’re using them for everyday expenses like gas and groceries, this can cause your debt to add up overtime to a point where you can no longer afford the monthly payments.
8. Your credit cards are maxed out.
If your credit cards are now maxed out, you may not have any way to pay for your basic necessities. This can be an extremely difficult situation in which to be. If you find yourself in this situation, it’s time to consider bankruptcy.
9. You’re considering loan consolidation.
Consolidating multiple debts into one payment can be useful if you have sufficient funds and your main problem is forgetting about bills you have or paying them on time. This is often not the case for many people. When you declare bankruptcy, your debts are evaluated and most can be discharged. Debts that cannot be discharged are set up to be paid through a payment plan based on your income. If you’re considering loan consolidation to combat overwhelming amounts of unpaid bills or debts, consider bankruptcy instead.
10. You’re considering using retirement money to pay off debt.
Dealing with high-interest debt can be draining and leave you wondering how you will ever get out of it. If you’ve exhausted savings and other assets, you might be considering tapping into your retirement money to pay off debt. This is not a good route to take. Your retirement money is a nest egg for the future, and should not be used to try to get ahead of debt. Instead, look into declaring bankruptcy. This will not only safeguard your retirement for a healthy future, but it will also help you find financial peace in the here and now.
If you recognize any of these signs, call Woodall & Woodall today for your free consultation. We are here to help and give you accurate information so that you can make an informed decision about your path forward. Don’t let the social stigma around bankruptcy keep you from a less stressful and healthier financial future.