Bankruptcy is simply a legal process through which you take care of your outstanding debt. The court system understands that financial plans do not always work out. You take out a loan and then lose your job. You lose assets in a divorce. You get hurt and face overwhelming medical debt. It happens. Bankruptcy offers one potential solution.
So, how do you know if it's time to declare bankruptcy? Here are a few common warning signs:
- You already maxed out the credit cards that you have. Maybe you were just using them to keep food on the table, but you're running right into those credit limits.
- You're using payday loans and other high-interest personal loans to make ends meet. Maybe you started using them when your credit cards maxed out because you had to get more money from somewhere and you felt like it was the only option you had.
- You have used a home equity loan. You tried to get rid of all of your credit card debt in one shot, but the debt quickly accumulated again. Now you have extra debt from the home equity loan and your credit card situation isn't getting better.
- The debt collectors have started calling you. Maybe they're even harassing you. It's not just that you owe them money; it's that you're missing those payments. They're not getting anything, and they won't let you rest until they do.
If you do decide that bankruptcy is the best way to go, make sure you really understand all of the options you have and the steps you'll need to take.
Source: Credit, "7 Signs You’re Heading Into Bankruptcy," Judy Sorensen, accessed May 25, 2018