Bankruptcy offers you a way to solve your financial problems if you are unable to pay your debts. It may be because you have borrowed more than you can pay, or your income is less compared to the amount you have in debts. Other financial solutions could be available for you, like debt consolidation. But bankruptcy is a legal solution that eventually gives you a fresh start in life.
If you are facing financial difficulties, you may never know the right time to file for bankruptcy. But the signs are always there and should guide you on the right course of action to take before your financial situation worsens. Here, we’ll discuss signs that you might be headed for bankruptcy. If you have started seeing these signs, it could be time to contact a bankruptcy attorney.
Signs You Could Be Headed For Bankruptcy
Filing for bankruptcy is not always an easy decision to make. You will do your best to get out of debt without considering bankruptcy. However, when no solution seems to work, you might find yourself contemplating filing for bankruptcy. The decision is usually guided by several factors, including the type and amount you have in debts and income. The goal of bankruptcy is to give you relief from your debts. The bankruptcy court usually makes all decisions, and you are expected to abide by the bankruptcy rules until the end of the bankruptcy period. But how do you know that it could be time to consider bankruptcy?
You Have a Hard Time Saving Money
Saving money is an integral part of everyday life for people who are already working. The saved money will protect you from unforeseen financial difficulties in the future. You’ll not need to borrow or fundraise when you encounter a financial emergency when you have some savings. It gives you peace of mind knowing that you are well-prepared for any eventuality in life. Saved money can also be used for large purchases, help reduce financial stress, avoid debt, and give you a great sense of financial freedom.
However, you can only save if you are making enough money. Your expenditure must be less than your income for you to have enough money to spend and save. However, if you have more in debts than you are earning, you’ll be left with nothing to save, which is a red flag.
If you haven’t been saving for retirement, enjoyment in life, home, or travels due to the many debts you have, it may be time to consider filing for bankruptcy. Bankruptcy provides a way to manage your debts, so you can eventually free yourself of those debts. Then, you can start saving for a better future. If you opt to remain in that situation much longer, you might never get out of debt or even save money.
Fortunately, bankruptcy offers various debt relief programs like debt consolidation and discharge of some debts to make it easy and quick to pay off your debts. You can then start working and saving for the life you have always desired.
You’re Unable to Make Minimum Payments on Your Debts
If you don’t earn enough money or don’t manage your income properly, it is easy to find yourself deep in debt. We have more money lenders in the country today with desirable lending terms. It explains why it’s easy to find yourself in debt. However, you must make at least the minimum payments on your obligations to avoid penalties. It depends on the number of debts you have and your income. If you have so many debts and a little income, you might never make the minimum payment on most or all your debts.
In addition to your debts, you have bills to pay every month. It might be a problem to make prompt payments on these bills if you’re already facing financial difficulties. Eventually, you’ll fall behind these payments, and your accounts will be past due, incurring interest and penalty fees. Before you know it, your name has been forwarded to debt collectors by the several companies you owe.
It is advisable to make the right decision before your financial situation worsens. There is no need to wait much longer if you are already unable to make minimum payments on your financial obligations. A bankruptcy attorney might provide direction based on your financial situation. Filing for bankruptcy allows you to devise a repayment plan that fits well within your budget.
You Use Credit Cards To Pay Debts and Bills
The surest sign that your financial situation is worsening is when you cannot cater to your regular expenses using your income. Your income should be equal to or more than your expenditure if you wish to live a life with minimal struggles. But if you are constantly borrowing money to get by, your situation might not improve unless you find a better paying job or another way to supplement your income.
For many people, a credit card provides a way for them to manage even with minimal income. They overlook that a credit card is another form of debt that must be repaid with high interest. Using your credit card to cater to your day-to-day expenses is a bad idea. Your credit card debt will continue to accumulate, and before you know it, you owe the credit card company more money than you should.
The gravest mistake you could commit while in this situation is using your credit cards to pay bills and other debts. All debts must be paid from your income. Once you start getting into more debts just to make a minimum payment on other obligations, you should seriously consider a way out.
The advantage of filing for bankruptcy soon enough is that the bankruptcy court will stop any effort by your creditors to recover their money. The court will then devise a way through which you’ll pay your debts. It takes away the stress of dealing with your creditors and wondering how you’ll pay a particular debt.
You Have Maxed Out On All Your Credit Cards
When you are issued a credit card, the credit card company determines the maximum amount of credit you can obtain from that card, based on your credit score and ability to repay. Financial advisors will recommend using the least amount of credit as possible to avoid paying high-interest rates. However, this might not work if you do not have enough income to cater to your everyday needs. You might find yourself using your credit card more than you should.
Hitting the limit on your credit card is not always a good idea. It will affect your credit score, hike the minimum monthly payments you should pay on that card, and cause the company to cancel some or all of your future transactions. It is also a sign that your financial situation is worsening and that you must do something before the situation becomes dire.
If you have already maxed out your credit card, you must act fast to lower your credit card balance, so you’ll avoid the consequences mentioned above. However, this may be a challenge if you are already struggling with other debts. Thus, you might find great relief in filing for bankruptcy.
Based on your financial situation and the type of debts you have, a bankruptcy attorney might help you manage your debts and start life afresh. Fortunately, California has different bankruptcy options like Chapter 7 and Chapter 13, from which you can choose the most ideal for your situation.
Debt Collectors Have Started Contacting You
If your debts have been a month or two past due, expect debt collection agents to come calling. Most lending or utility companies choose to involve debt collecting agencies to recover debts that have fallen due. That’s when you start receiving messages, emails, and phone calls from not-so-friendly collectors, demanding that you make payments as soon as possible. They even threaten to take severe actions against you.
Debt collecting agencies employ various tactics to make you pay your debt. Their tactics are generally annoying, some predatory, while others illegal. You may not know how to deal with them, especially if it is your first time to be in a situation like that. That is why you might need legal help as soon as you receive the first emails, calls, or messages. If more companies forward your name to collecting agencies, you might start receiving these calls and messages every day.
The best way to stop threatening calls from collecting agencies is by paying your debts to the last cent. If this is not possible due to your financial situation, you might want to consider filing for bankruptcy. A bankruptcy attorney will come to your life when you need his/her help the most. Your attorney will advise you or even obtain a court order to stop debt collectors from contacting you.
Once you file for bankruptcy, the bankruptcy court will effect an automatic stay on any effort by your creditors to receive their money. It means that it will be illegal for the collection agencies to call, email or message you. It will give you great relief as you plan on the best way to manage your debts.
You Have Acquired a High-Interest Loan
If you haven’t been repaying your debts as you should, your credit score must be very low. Thus, you might find it challenging to find an affordable loan with friendly terms. Most loan lenders are skeptical when it comes to lending to defaulters. Those who choose to lend people with a questionable credit history offer their loans with higher interests.
In your situation, you might find that the only loan you can secure is an expensive one. It means that you might not find an affordable loan until you repair your credit. You can only start rebuilding your credit once you have repaid or managed all your debts. Filing for bankruptcy is an excellent way of achieving both.
Other than high-interest loans, people in financial distress can easily apply for payday loans. A payday loan lender will not consider factors like your credit history when lending to you. A traditional lender will hesitate to lend to you if they are unsure of your ability to pay back the loan. Payday loans are costly and have a short repayment period. If your financial situation hasn’t improved within a few weeks after applying for a payday loan, you might find yourself borrowing another payday loan to settle the first.
To avoid getting deeper into debts, you could consider filing for bankruptcy. The bankruptcy court will help you manage your debts with the bit of income you are receiving. You’ll be able to cater to your everyday needs and at the same time make some payments to your debts. Eventually, you’ll be free of overwhelming debts.
You Don’t Qualify For Debt Management Programs
If you lose your income and are unable to repay your debt, your creditor might agree to revise the repayment terms and allow you to pay in smaller installments over a more extended repayment period. However, this is not an option if you have multiple loans from different lenders and still receive the same income. Each lender will want you to prioritize their debt, which could be a challenge if your income is not enough to make a minimum payment on all your debts.
However, we have debt management programs in California offered by companies willing to help debtors who are deep in debts but are willing and able to pay them. One such program is debt consolidation. With debt consolidation, all your debts are summed up into one, and then a repayment plan is devised according to your income.
Unfortunately, not everyone qualifies for programs like these. For example, if you have an extremely low credit score. Companies offering debt relief programs assist debtors who show the capability of paying back the consolidated loan. If your credit score is low, you may not qualify. The only option left for you would be to file for bankruptcy.
The U.S constitution grants every citizen a right to file for bankruptcy. Bankruptcy courts do not consider your credit score to grant your request. You only need to identify the bankruptcy Chapter that best suits your need, then seek the help of an experienced bankruptcy attorney in filing it.
Your Income is Not Enough To Lower Your Debts
A quicker way to get out of debt is to make monthly payments to your credit accounts without fail. It means that you must make enough money to cater to your personal needs, pay your debts and save for future needs or large purchases. If your income is not enough, you might neglect one or more essential needs and pay the others. It could be that you do not make enough payments to your credit accounts, save, or spend enough on your bills.
The solution available for most people is finding another job or source of income to increase their income. If that happens, you might comfortably manage your debts without seeking another solution. However, this solution doesn't work for most people. If you haven't managed to boost your income and have more debts to pay, it could be time to consider filing for bankruptcy.
Your creditors might not be willing to revise their lending terms to make it easier for you to make a minimum payment every month. Some will even go to court to have your account garnished. It leaves you with an even lower income to work with.
Filing for bankruptcy will stop all account garnishments and other efforts by creditors to demand payment from you. The bankruptcy court will consider your income in determining the best plan to repay your debts. The court might even discharge some of your debts, leaving you with only those that you can manage with your income.
Your Financial Situation is Affecting Your Health
Debts impact various aspects of your life, including your finances, social, physical, and mental wellbeing. It is impossible to remain relaxed and happy when you are struggling financially. It becomes even worse if debt collectors have started calling and messaging you.
There are several indications to show that your financial situation is messing with your health. If you are constantly irritable, anxious, are not sleeping well, or experiencing panic attacks, it might be time to make a final decision to straighten out your finances.
Contact a reliable bankruptcy attorney, and seek his/her advice. You will be surprised at how fast you’ll start feeling better, knowing that you are on the right path to freedom from debts. A bankruptcy attorney will walk with you through the legal process until your situation is resolved. He/she could even help you rebuild your credit score after you have managed all your debts.
