Wondering if bankruptcy may be the right option? If your debt is spiraling out of control, don’t wait too long – read why that’s a bad idea in my last blog post. So here are a few “warning signs” that can indicate that your financial situation is out of control. In these cases, when to move forward with bankruptcy – may offer the only way out:
You keep putting everyday necessities onto credit cards
Consistently putting gas or groceries on a credit card because you have no available cash is a big red flag that you are on an uphill treadmill of debt. Most people we find do this because they are spending their entire paycheck on servicing debt. This type of behavior makes your situation worse – you spend $50 on your minimum payment, but you need $50 in groceries, so you charge it to the card you just paid. You are actually going further into debt on this transaction because of interest and over draft fees.
- You pay one credit card with another
Paying one credit card by taking out a cash advance or transferring the balance to another card is a stalling tactic and will not make your debt go down. If this happens regularly you have a problem since your debt grows out of control quickly.
- Your wages are or will be garnished soon
If you are not making payments a lender can get a court order to garnish your wages. This means they will contact your bank or employer to take money directly out of your paycheck. Your wages can be garnished between 25% and 50 % or the gross here in Utah, depending on the type of debt. If your wages are being garnished or you have received notice a lender is attempting to garnish your wages, declaring bankruptcy will prevent this order from going forward, at least temporarily. Additionally, you may be able to have the debt dismissed.
- You’re considering taking money from retirement accounts to pay debt (or you already have)
Don’t take your retirement funds until you speak with an attorney! This is money for your future. If you take that money out, you’re not only robbing your future self, but also creating a tax bill that might become one more debt you can’t pay. Because many retirement accounts are protected in bankruptcy, avoid pulling any money out until you speak with us.
- You’re already working a second or third job
Many of our clients work side gigs. Getting extra income sometimes enough to diminish their debt. But this is not always the case. However if your debt is already so large that an extra 10 hours of work per week per week at a side hustle is not making a dent you may need to consider more extreme measures, such as bankruptcy.
- Debt-related stress is affecting your work and personal life
It does not help your financial situation if you are so worried constantly about debt. Do too much of that and you lose focus at work and get fired. If you find debt problems are interfering with your life to a significant extent then declaring bankruptcy might go a long way towards improving it.
- You’ve already tried the alternative methods above and are still seeing your debt increase every month
We have numerous clients try to avoid bankruptcy – most push if off too long. So if despite all your best efforts you are not making a dent in your debt, it may be time to consider bankruptcy.
When to move forward with bankruptcy is an individual choice of course but if your financial problems are growing and you are not seeing daylight ahead bankruptcy might be the best options. Working with an experienced attorney can help you get on the right track. We tell many people we talk to after the first consultation that bankruptcy for them is a bad idea. Seek out an honest bankruptcy lawyer and have them walk you through your options you might be surprised how quickly you can turn you finical problems around.