Why You Cannot Avoid Bankruptcy
If you are struggling to pay huge mountain of bills, bankruptcy may be inevitable. Bankruptcy is one solution for escaping the suffocating nature of thousands of dollars’ worth of debt and debt collection. Although it can have serious consequences for your credit and your future borrowing, it may be your best option.
If you meet the majority of the following criteria, you may be unable to avoid bankruptcy:
You Are Thousands of Dollars in Debt
Most people who file for bankruptcy have thousands of dollars in debt that is accumulated for a number of reasons, ranging from taking out a mortgage, to medical bills, to purchasing electronics, cars, or other personal goods and household items.
If you have thousands of dollars in bills that you have to pay, bankruptcy may be the only way to eliminate the debt or establish a manageable payment plan.
You Are Only Paying Interest or Making Minimum Payments
If you are only paying interest on your loans and credit cards, you may not be able to avoid bankruptcy. If you are only making minimum payments each month, your debt will take much longer to pay off, you will end up paying more in interest than you would otherwise, and your credit score will be negatively affected. Further, debt collection agencies may start bothering you for payments.
If you have multiple loans or credit cards on which you are only paying the minimum each month, you may quickly find yourself in a financial situation that requires bankruptcy to escape. You can read more about the consequences of only making your minimum payments at NerdWallet.com.
You Have Little or No Income
Another sign that you may be unable to avoid bankruptcy is a situation in which you have little or no income, and no hope for an increase in your earnings in the very near future. When coupled with credit card and loan payment requests each month, a lack of income can mean financial disaster.
You Are at Risk of Losing Your Home, Have Had a Lawsuit Filed Against You, or Have Had Assets Repossessed
If the bank has sent you a notice of default, which is the first step in the foreclosure process, and can be read about more at HUD.GOV, filing for bankruptcy will provide you with an automatic stay, which stops the foreclosure process in its tracks. You may also need to file for bankruptcy if you have had a lawsuit filed against you by creditors, or if you have had any of your assets repossessed. Again, the automatic stay will provide temporary reprieve.
Bankruptcy May Be Your Only Option
If any of the above scenarios are relatable to you, you may be unable to avoid bankruptcy. It is important that you start familiarizing yourself with the different types of bankruptcy (see USCourts.gov’s website for more information), and consider speaking with a financial professional or a bankruptcy lawyer. The sooner you act to get your finances in control, the sooner that you can get your life back.