Top Warning Signs To Consider Bankruptcy

You Have Been Terminated From a Job.

Obviously, if you are living paycheck to paycheck and you lose your job, that is a definite warning sign that you could be headed for some real trouble. If you start to become unable to pay your bills off at the end of the month, then that’s the first stage where you should consider looking at a bankruptcy, especially if you’re in a position where you might not be able to get another job for three or four months at least.

You Found Out that Your Income is Less than Your Expenses.

Obviously, if you’re spending more than you’re bringing, then you are going to start having to use credit and you’re going to start not being able to pay off your balances on your credit cards at the end of the month, or you’re going to have to start borrowing money in some other way. At that point when you start to not be able to pay back the money that you owe or not be able to save money at the end of the month, you’re headed into that area where eventually you’re going to have to look into filing bankruptcy.

That’s especially true if your monthly credit card bills are part of your expenses. Let’s say you’re paying credit card minimums that take up two, three, four hundred dollars a month of your income. If getting rid of those means you would be making more than your expenses, then that might be a situation where bankruptcy could help you right away.

Your Wages Are Being Garnished.

Wage garnishments are one of the reasons that people come to see me the most often. It’s one of those things were people tend to struggle in bankruptcy or before filing bankruptcy. They will struggle for a long time though they will try to make partial payments, they will work things out with creditors even though they are long past the point where they should have maybe started considering bankruptcy.

What will really push someone over the edge is getting a wage garnishment, because then your expenses are not going to be able to be met if you’re already having trouble. Even if you’re not having trouble, but all of a sudden you get a quarter of your income taken away for wage garnishment, that’s going to put you in a real bad state and the good thing about bankruptcy is we can stop a wage garnishment right away.

By filing bankruptcy, you can not only get rid some of the debts and stop having to make monthly payments on some of the debts that you have, you can also end that wage garnishment the day that you file.

You Are Taking from Your Own Retirement

This is just like spending more money than you make. Instead of taking money from credit or credit cards or loans, you are borrowing the money from yourself from your retirement account, which is a bad sign for you financially. If you don’t expect to have a change in the near future why you’re going to start making more money or have fewer expenses, then it’s really something that you should stop doing. It’s going to be much better in that situation if you don’t have any other way to meet your debts, to file bankruptcy than to take it from your retirement.

Your retirement account is going to be exempt from execution in the bankruptcy, so you’re not going to lose any of it. If you were to sit and take money from your retirement account, then maybe incur penalties and bad tax consequences from that and then eventually you end up still having to file bankruptcy. You’d be much better off just filing bankruptcy, saving the taxes and the penalties on taking money out of your retirement account or taking a loan out, and keeping all that money in your retirement account and just filing bankruptcy and getting yourself a fresh start right now.

You Have a Lot of Medical Bills for Yourself or Immediate Family Members.

Medical bills are up there on the top two or three reasons why people come and see a bankruptcy attorney. It’s one of those things that can be unexpected that can come up, so, again, if you’re struggling and you’re just barely making enough to make ends meet or you’re not even making enough to make ends meet and then you have some sort of a medical problem, those expenses can add up really fast.

Even if you have medical insurance, you’re still going to have to pay deductibles and things like that and that can throw you over the edge pretty fast. That’s a warning sign if you’re having trouble paying your medical bills that are dischargeable in bankruptcy and it may be something that you want to look into.

You Are Falling Behind on Mortgage Payments.

If you’re falling behind on mortgage payments, you’re in trouble. That’s the kind of thing you don’t want to mess with because eventually, you’re going to get your house foreclosed on. Through bankruptcy, you can stop a foreclosure if it’s already happening, or you can restructure it through a Chapter 13 bankruptcy the back payments on your mortgage, so that you can catch those up while also eliminating some of your other debts to give you some extra breathing room each month.

If you are having trouble with your mortgage, the bankruptcy can be a good thing, either a Chapter 7 or a Chapter 13, depending on your situation.

You Find that You’re Still in the Hole, Even Though You’re Doing Everything You Can to Pay Your Debts on a Regular Basis.

What happens is people will be making a certain amount of money, they are working hard, they have a regular job, and they have enough to meet their regular expenses, but what I see with my clients often is that a large chunk of their budget each month goes toward paying back debts that they had in the past.

If you’re at the point where you have so much to pay back on, say, a payday loan or a minimum for a credit card or something like that, when you have enough of that that it’s causing you not to be able to keep up every month, you’re definitely headed down that path where now if something else happens like we’ve been talking about, a medical problem or a job loss, you’re going to be thrown into that area where bankruptcy might be a really good solution; it might be the only solution that can help you out at that point.

You Underwent an Expensive Court Trial or Lawsuit.

Certain situations where if you have a lawsuit that goes against you, bankruptcy can be, in some instances, the only way to get out from under that debt. If you get a judgment against you for a significant amount of money, once that judgment is entered, that creditor, the judgment creditor, can follow you around forever. They can garnish your wages, they can attach your bank accounts, and they can essentially chase you down until they are paid off. That could take years, or it might not even ever happen if it’s significantly large.

Another thing that bankruptcy can help you out with is to get out from under that debt if it’s dischargeable, and most of them are; there are a few instances where they are not, but in most cases, if you lost a lawsuit of some sort or are in that kind of a situation, then, yes, bankruptcy is definitely an option.

You Are Constantly Catching Up with Bills and Having Your Utilities Frequently Shut Off. 

You need your utilities. You need power and water and all that stuff to live your daily life, so if you are losing those things because you are paying your utility money towards credit card balance and things like that, then that is a major red flag. You might be past the point where you could have started considering bankruptcy, you might need to really do it real soon. So, yes, if you have that kind of an issue, definitely consider bankruptcy.

If You Are More than Three Months Behind on Your Car Payments.

If you’re more than three months behind on your car payment, you’re going to start having issues where you could lose the car; it could be repossessed. Bankruptcy is one way to prevent that from happening if you want to keep the car. Bankruptcy also can allow you to surrender a vehicle and get out from under a vehicle loan, i.e., where your car is worth far less than the amount of loan. That happens with all the new cars which lose value so fast.

A lot of times, clients will have a car that’s worth only maybe five or six thousand dollars and they have a loan on it that’s nine or ten thousand dollars. In your current situation, you’re not able to pay that loan off even if you wanted to, so you’re going to lose the car pretty soon and then you are going to be saddled with a judgment on top of that for the rest of what’s left over after they sell the car. If you’re in that kind of a situation, bankruptcy can help you either keep the car if you want to keep the car or it can help you just get rid of the car and that loan and get a new car.

You’ve Taken Equity Line of Credit to Pay Your Credit Card Bills.

If you’re having trouble paying unsecured credit, then that’s an early warning sign of bankruptcy and then if you’re choosing to incur more secured credit, meaning the equity line of credit, in order to pay off unsecured credit, presumably on a house or something like that that’s secured by your house.

You are taking on a dangerous kind of credit, which isn’t the secured kind of credit because they can repossess things or they can foreclose on houses. You’re using that kind of credit to pay off the less dangerous kind of credit, which is the unsecured credit, which is dischargeable on bankruptcy.

If you’re starting to do that, you really need to consider if you’re in a situation where you think that something is going to change in the near future, it’s going to allow you to start paying this stuff back. If it’s not, if you don’t have a new job coming up or you don’t expect some different change in career or some raise to come along, if everything should keep going the way that it is, then you really should consider bankruptcy instead of taking on more secure credit.

Borrowing from Credit Cards to Pay for Credit Cards

This is another early or maybe middle stage warning sign of bankruptcy. When you’re taking out new credit cards to pay off old ones, that means that you are not able to keep up with your monthly balance. A person that’s in a really stable financial situation pays off their credit cards at the end of every month. In reality, there aren’t a whole lot of people that are doing that.

Just because you’re not able to do that completely doesn’t mean that it’s time to consider bankruptcy but if you’re starting to get to the point where you can’t make the minimum payment and you’re now taking out more credit to pay off the old credit, you’re headed down the wrong path; you’re not headed toward getting out of debt, you’re headed toward getting more into debt, so that’s definitely a time where bankruptcy might be able to help you out.

You Start Receiving Calls from Creditors

This happens when you are not making your minimum payments. Maybe you’ve used up all your credits and you’re only able to get any more credit to pay off the credit that you already have. You don’t have any other assets or any other way to get a loan to pay off the credit and the minimum is coming to you, so now you’re starting to miss payments. This is the time when you’re pretty much ripe for bankruptcy when you start getting calls from creditors.

One of the good things this will do, if you would just like to file bankruptcy, is it will stop the calls from the creditors right away because it will be an automatic stay. They can’t legally contact you. At the point you file bankruptcy, they have to stop and the other good thing is it will free up all the money that you’re trying to pay towards minimum payments on your credit cards and towards everything that is old credit that is sucking up all your budget.

For more information on Top Warning Signs To Consider Bankruptcy, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (801) 200-3795 today.

By Court Koehler

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