When struggling with debt, there comes a time when personal bankruptcy may be the best choice. The most well-known types are Chapter 7 and Chapter 13, but the former is most since it’s quick and simple.
Here are seven signs that it may be time to consider filing for pesonal bankruptcy.
1. You’re Constantly Paying Bills Late
A missed credit card payment isn’t something to panic over, but if you find yourself putting off payments to pay other things all the time, there’s a problem. Not only can paying bills late incur serious fees that make the debt even higher, but it also damages your credit score. This could mean a late credit card payment, delinquent medical bill, or student loan reported as being in default.
2. Assets and Income Versus Debt
A simple test to determine whether personal bankruptcy is right for you is to calculate whether your debts add up to more than half of your annual income. If the numbers don’t stack up in your favor, it’s unlikely you’ll be able to get a handle on the debt any time soon, and will continue to live paycheck to paycheck.
3. You’re In Multiple Types of Debt
While some people grapple with one major chunk of debt, such as credit cards or medical bills, if you have multiple types of debt that you’re trying to juggle, bankruptcy can provide relief. Trying to divert your financial resources in multiple directions is complicated, confusing, and often ineffective in the long run.
4. You Can’t Make Minimum Payments
Making payments late is one thing, but if you also can’t meet minimum payments, you’re only digging the hole you’re in deeper. If your income can’t keep up with the number of payments due each month, you need to reassess your financial situation.
5. Your Income Won’t Increase
Ideally, income increases with lifestyle expenses, but that’s rarely the reality today. For many people working a steady job, unless they receive a big raise, inheritance, or some other major financial game changer, chances are you’ll continue to grapple with debt with the same paycheck amount every month. If nothing is getting better and you’re not making headway, you’re stuck and something needs to be budge.
6. Five Years Isn’t Enough Time to Pay
If you come up with a budget and plan to pay all the debt you owe, and you can’t do it within five years, it might be too far out of your hands to address. This is why Chapter 7 bankruptcy exists in the first place.
7. You’ve Already Been Served with a Lawsuit
This is the nightmare scenario that many people try to prevent by going to an attorney before things get too bad, but it’s only a matter of time before someone takes you to court to recoup their expenses. If this happens to you, get on the phone with a lawyer as soon as possible.
If your situation matches the conditions for Chapter 7 bankruptcy and you proceed, chances are you’ll succeed, and the debt will be discharged. In 2016, 95.5 percent of Chapter 7 cases brought before a court were approved, freeing the individual of the debt they owed. Once you have a full understanding of what the consequences will be and find a trustworthy attorney with whom to work, bankruptcy may be the best thing that ever happened to you.