3 signs that it may be time to file for personal bankruptcy

On Behalf of | Mar 11, 2024 | Bankruptcy

The decision to file for bankruptcy is often a very difficult one. People want to be responsible and to handle their financial obligations without assistance. However, factors outside of someone’s control, ranging from health emergencies to unexpected job loss, might leave an individual struggling to meet their financial obligations.

The aversion people feel to bankruptcy often means that they miss the best time to file. Someone who is navigating any of the three circumstances below may need to consider bankruptcy as a potential solution for their current financial challenges.

A creditor filing a lawsuit

The law allows creditors to seek repayment through a variety of different tactics. Sometimes, if people do not voluntarily make payments on their debts, creditors decide to take them to court. A pending creditor lawsuit could worsen someone’s budgetary woes by leading to wage garnishment. A lawsuit could also endanger someone’s most valuable resources. When someone files for bankruptcy, the courts grant them an automatic stay on collection efforts. Creditors typically need to dismiss lawsuits after someone files for bankruptcy.

Missed payments for a financed vehicle or home

Few collection efforts are more difficult to bounce back from than foreclosure or repossession. Someone who committed to a secured debt like a mortgage or car loan could be at risk of losing the collateral property they purchased with that financing if they fall behind on payments. Oftentimes, someone has to miss multiple mortgage payments to be at risk of foreclosure. As little as one missed car payment might lead to repossession. Filing for bankruptcy before lenders repossess a vehicle or foreclose on a home could help someone protect resources that they need for daily life.

Struggling to choose what bills to pay

Someone who cannot balance their budget is likely only going to find themselves in worsening financial circumstances over time. If someone must choose between paying their rent and covering the minimum payment on their credit cards, they may accrue numerous fees and a lot of interest on the amounts that they already owe. Even the strictest budget may not be enough to correct a scenario where household income cannot keep up with financial obligations.

A successful bankruptcy can eliminate certain debts through a discharge and give someone an opportunity to re-balance their budget. Recognizing when bankruptcy might be the best solution for someone’s financial struggles could help them maximize the benefits that they’ll ultimately derive from filing.