When you are struggling with a lot of personal debt, you can hardly overlook the crisis you are facing as the problem is not going to resolve quickly. If you do not work out a strategy to repay the debts, the bills are going to pile further, but the worst that can happen is that you may be headed towards bankruptcy.
Although bankruptcy can damage your credit ratings greatly, it is often to be chosen as the ultimate option. What are the warning signs that you are already heading towards the option of bankruptcy? The following points will explain.
Missing the payments
There is no bigger sign of grappling with personal debts than the inability to pay the current bills such as student loans, mortgage payments, credit card bills, auto loans, or medical bills. When people struggle with their finances, they begin making the minimum payments on their credit cards in a bid to reduce the outflow of cash. However, if you cannot even manage the minimum payments, you are probably heading towards a greater financial difficulty.
No savings
Whether it is to plan for the vacation ahead or for the bad times, and retirement, saving money is one of the major ways to control your finances. However, if you find that you are no longer in a position to contribute towards the retirement funds, or save the money you do each month, your finances are in trouble. When debt engulfs a major part of your income, it is time to brush your knowledge about the insolvency and the bankruptcy code so that you are more familiar with the process towards the end.
Not qualifying for a debt management option
Often the debtors try to work out a way out of the debts through a consolidated debt management plan as it helps in reducing the amount of money to be paid to the creditors. It can also help in lowering the credit card interest rates via a single monthly payment to be made instead of managing multiple bills. However, when the credit counselor checks your budget and finds out that you cannot even qualify for the debt management plan, you may not have another alternative left besides bankruptcy.
Home equity loan does not help
When your credit card bills grow larger, taking out a home equity loan seems to be the best way to stay on the safe side. As a matter of fact, it is one of the best tricks to avoid running up against the credit card bills again. However, considering the home equity line of credit is never the best way to resolve unsecured debts. Even though you can pay off the unsecured debts, the home equity loan and the mortgage are still going to remain. So if you fail to pay them, you have a risk of losing the home as it is the only collateral against the loan. AYou must seek the help of bankruptcy lawyer to deal with such circumstances.
Earning is not enough
If you are unable to make any significant change in your balances, it is a bad sign indeed. Even though credit card is a useful financial tool, it takes very little time for the credit card debts to go out of control. When you find that the minimum cost every month for maintaining the balance is all that you can afford, the first step to consider is to make the monthly budget lean.
Furthermore, you can also try to work overtime to boost your earnings. However, you might not be able to get down to a comfortable position despite lowering the monthly budget and working overtime. It is time to realize that you have reached a point of saturation and the only way to get out of the debts is to go for bankruptcy. However, you can try to consult with the bankruptcy lawyers and allow them to evaluate your situation so that you are in a better position to decide whether to go towards filing insolvency.
Foregoing the necessary shopping
When you are in severe debt, you have to forego the shopping of the latest items such as the smartphone or a new car. However, if you find yourself compromising with the items you need for everyday living such as grocery or medicines, you are certainly in trouble. Other things such as the payment of health insurance coverage or carrying out the necessary repair work of the vehicle also indicate that you are in deep trouble, if you need to skip the shopping of the things of daily need, you may not have any another option than to file for bankruptcy.
Calls from the debt collectors
When you start receiving those calls from the debt collectors and messages through the email demanding money, it usually occurs when the amount of debt that remains unpaid surpasses three months or more. In addition to this, you might also get a notice related to the due amount on whether to put it into collections or uncollectibles in your credit report.
Maxing the credit cards
One of the things that indicate that you are moving towards bankruptcy is when the credit cards max out. When the debts become unmanageable, you will not find another way to increase the credit lines or get approval for the new credit. When you need to use the credit card to meet your daily expenses, you have to choose bankruptcy as the only option. Some of the other reasons for filing insolvency is job loss, large medical bills, and not finding another job.