In June, bankruptcy filings totaled 37,700, a 17% increase from last year.
Filing for bankruptcy isn’t to be taken lightly. It’s one of the most important financial decisions you’ll ever make. It will reduce your debt but also destroy your creditors’ trust. The lasting impact on your credit score can remain for ten years.
If you decide not to file, you could have more debt, and your financial situation will only worsen. Being realistic, if you’re considering Chapter 7 Bankruptcy, your only saving grace is winning the lottery or gaining a huge inheritance.
When filing for bankruptcy, weighing the pros and cons is important. Working with a bankruptcy attorney who knows what they’re doing can be a great way to make the best financial decision.
We’ve compiled a list of nine signs you should look out for before deciding whether or not filing for bankruptcy is right for you. First, let’s take a quick look at types of bankruptcy.
What Is Chapter 7 Bankruptcy?
A Chapter 7 Bankruptcy differs from a Chapter 13 Bankruptcy. You don’t file a plan of repayment.
Instead, your bankruptcy trustee collects and sells the non-exempt assets to pay your creditors. The asset sale must be per the terms of your bankruptcy.
Some of your assets may be tied up in liens or mortgages that bind you to other creditors. The Bankruptcy Code allows you to keep some of your “exempt” assets. However, a bankruptcy trustee will liquidate your remaining assets.
Potential debtors should know that filing a petition under Chapter 7 risks losing assets like real estate and vehicles.
A Chapter 11 Bankruptcy is for business owners. If you own a small business registered as a sole proprietorship, you can include it in your Chapter 7 Bankruptcy.
1. You Can’t Repay Your Debt
The debt keeps mounting regardless of how much you budget, slow your spending, or work extra hours.
There are many reasons why people go behind on their bills.
Things like job loss, divorce, medical bills, or other unexpected events can cause your finances to spiral out of control. Recovering from a financial crisis can be difficult if you’ve lost a chunk of your income.
2. You Can’t Refinance Debt
Many people on the verge of bankruptcy are in arrears and unable to obtain a loan to rectify the situation. The only solution to stop the hemorrhaging is to speak with a bankruptcy lawyer. The bankruptcy attorney can help provide you with a clear understanding of how dire your situation has become.
Refinancing debt isn’t a solution to getting out of debt. You need your debt to disappear so you can have a fresh start. Your credit will suffer, but the good news is you can’t rebuild your credit until after you file for bankruptcy.
3. Student Loan Debt Is Weighing You Down
The resumption of student loan debt weighs on borrowers mentally, physically, and financially. It’s a long shot, but considering bankruptcy options to discharge student loan debt could work.
If you want to file for student loan bankruptcy, you must do it in one of two ways. First, you can file a Chapter 7 or 13 Bankruptcy. Next, you’ll have to go through what’s called an Appellate Procedure).
The biggest hurdle to getting student loan debt discharged is proving the debt is causing an undue hardship.
4. You’re Facing Foreclosure
You’re in arrears on your car payments, rent payments, or mortgage payments because you’re unable to make all of your payments.
You may think you’ll get a better deal from your lender if you’ve had a long-term relationship with them, or there’s a good reason why you’re late.
Unfortunately, you won’t be able to get any relief from your lender, and you’ll need to consider other options, such as bankruptcy.
5. You’ve Developed a Skip Payment System
Last month, you didn’t make your biggest credit card payment because you needed to pay the past-due electric bill. Each month, your mortgage payment is paid a few days later.
Your new normal has become a game of scramble. You’re calculating how much you can pay and which bills aren’t more than a month behind. It’s mentally and physically draining just to think about it.
6. You’re Making IRA Withdrawals
When you’re about to call the provider of your company’s retirement accounts, you should look up the number for a bankruptcy attorney instead.
IRAs and most retirement accounts are shielded from creditors even if you declare bankruptcy. This protection is courtesy of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which was passed in 2005.
7. You No Longer Answer Unknown Calls
You don’t answer your home, work, or cell phone because you’re worried about who’s calling. What they’re saying and claiming will happen is making you physically ill. Your emotional health becomes compromised as well.
These calls could be a sign that you should think about bankruptcy. An experienced bankruptcy law firm can prevent your creditors from calling you.
8. You’re Searching for Title Loans
Two ways to get quick cash to pay your bills are through Payday loans can car title loans. But can be costly when used to float from paycheck to paycheck. They can take possession of your car if you fail to pay your title loan.
Never, ever fall into the traps of predatory lenders. Instead, Google “Bankruptcy Law Firm.”
9. You’re About to Invest in Fast Money Schemes
Social media is flooded with ads on ways to become a millionaire overnight. All you need to do is pay for a course or one-on-one training.
Use that money to hire a good attorney to help you file for bankruptcy. It will be your best money spent since your financial problems began.
It’s Time to Make the Call
Chapter 7 Bankruptcy is a big deal. It can change your life. So can the stress and embarrassment of living with mounting debt.
You can recover from bankruptcy faster than foreclosures, divorce, or the years it’ll take to pay off your outstanding debt.
Meredith Law Firm wants to help walk you through your bankruptcy options if you’re considering bankruptcy. Call now for a FREE consultation with an experienced bankruptcy attorney.