There are many warning signs that can appear in person’s financial life that can signal that a person is insolvent and in need of declaring bankruptcy. If you can recognize these signs then it is possible for you to prepare to file for bankruptcy. A timely bankruptcy filing can avoid the pitfalls of irreversible financial mistakes. I often discover that my clients have made these mistakes prior to coming to see me.
I wanted to warn people in this blog so they could consider bankruptcy when the financial danger first appears so they can avoid the mistakes that come with the failure to recognize the warning signs of an impending bankruptcy. If these signs appear you may be in a situation where bankruptcy makes more sense than continuing with a charade or outright lie that you are “someday” going to pay your debts.
Many people continue with this denial for years and years and some make many financial mistakes because of it. Some will cash in their retirement funds or sell other property to raise cash in an attempt to pay down their debts. Retirement funds and many other types of property are exempt in bankruptcy. It is always a mistake to cash in retirement funds or many other types of property that are exempt in a bankruptcy. You can keep these assets in a bankruptcy and still get rid of your debts.
Some people will struggle along for long periods paying partial payments to creditors which will often cover only interest on their debts. This only results in them their spending endless amounts of money which could have been saved had they only admitted to themselves that bankruptcy made sense. Some will even borrow some money from friends and relatives in an attempt to pay down the debt. This money is completely wasted and probably lost forever if these people eventually do file a bankruptcy.
1) The first warning sign is when you are paying interest only on credit card or other debts. If you cannot pay down the debt itself but you are paying interest only then that is a sign of trouble ahead. Interest rates will rise and just like our government you will eventually reach a point where your interest on your debts takes up a huge share of your income so that you cannot cover your basic monthly expenses for living. This is an unsustainable situation and one which signals that bankruptcy make s a lot of sense for you.
2) Unemployment or underemployment. If you have debts that you could afford to pay on when you high paying job but then you lose that job (or you get a job which pays far less) then you may be headed for bankruptcy. Some will believe that they can magically still pay these debts even though they now need their now reduced income to continue to pay their monthly expenses.
3) When your expenses exceed your income each month before you pay your debts. If you have no money left over after you pay your current monthly bills to pay past debt payments then it is probably time to consider bankruptcy.
4) If you have had a vehicle repossessed and you have been hit with a large deficiency balance because of it then you may need a bankruptcy. Some of my clients have multiple cars repossessed and they thus have multiple deficiency balances that can add up to tens of thousands of dollars. If they cannot afford to keep up with payments on the vehicles prior to repossession then they will probably not have enough income to pay off the deficiency balance on the old car and somehow secure a new car to drive.
5) Another sign is if you suffered some outrageously high medical debt that is unpayable. Many of my clients are uninsured or underinsured. This works for some unless there is a need for an expensive medical procedure. It is not long before the collectors are calling you to pay tens or even hundreds of thousands of dollars in medical bills. They will demand that you repay just like any collector and you may not have the income to do it.
6) Then there is the constant steady unabated calls from creditors that you cannot pay so you do not answer your phone. And this leads me to the all important psychological effects of long-term debt upon people. The constant harassing calls and the knowledge that there is a debt out there that you have no way of paying is a tremendous psychological burden to people. Bankruptcy lifts this burden, eliminates the debt and the terrible unending stress that goes with it.
7) Some people have multiple court judgments against them for unpaid bills. These judgments could be for credit cards, deficiency judgments, unpaid medical bills, or debts of any kind for which a creditor has sued you and obtained a court judgment against you. That creditor can now garnish your wages, seize your property, or demand you come into court for a debtor’s exam. These “exams” will allow creditors to pry into your finances no matter how much you wish to keep them private. These are to be avoided at all costs.
8) You may already have garnishments taking 25% of your income. You now are operating with a reduced income and each creditor is standing in line to get his 25%. You could pay this virtually forever if you owe enough money to creditors. Bankruptcy will stop the garnishments, return your income level to what it should be, and banish the debts forever.
All of these are signs that bankruptcy probably would make sense for you and you should get some advice from a bankruptcy attorney. If you have several of these warning signs (and even if you have only one) then bankruptcy is an option to consider. There is a little bit of a miracle in bankruptcy. It can wipe out your debts and free you from your debt burdens. It is the only way I know of but we don’t need another because it works so well. So think about if you have any of these signs and if you do then consider bankruptcy.
I am a San Diego bankruptcy attorney. For further questions please visit my websites at www.farquharlaw.com or www.freshstartsandiego.com. Or call my office for a free consultation or for any other advice about bankruptcy or debt at (619) 702-5015. Call now for free credit report and analysis!
For a free e-book on “13 things to do to prepare for your bankruptcy filing” please e-mail me at firstname.lastname@example.org.
Warning sign courtesy of Free Grunge Textures. Danger sign courtesy of Atomicjeep.