Attorney Blog

When Should You Consider Bankruptcy?


The decision to file bankruptcy is a difficult one because it means admitting a loss of control in the area of personal finances. Often it takes a catastrophic event like a tax lien or a lawsuit for money owed before one proceeds with a very reluctant bankruptcy filing.

However, sometimes bankruptcy is unavoidable and the peace of mind of having debt discharged is worth the impacts to credit and pride. If you find debt, stress, and collection calls basically rule your life with impacts to health and work quality (if you are employed), bankruptcy may be the best option to eliminate stress and get your life back.

Struggling to Finance Necessities

If you are using credit cards to cover food, heat, and other utilities, that is the first sign of financial struggle. It also further increases your debt burden which raises minimum payments and interest charges, only digging your hole deeper.

This situation may not be horrible if you only have to do this for one or two months. However, if this practice continues due to long-term unemployment, health issues, and low wages with no better job prospects, it may be best to eliminate your debt burden through bankruptcy so your income is free for these expenses.

Receiving Collection Calls

If you find that you receive so many collection calls that you avoid answering your telephone or screen all your calls, you have a serious debt problem. Collection calls are the precursor to lawsuits which further threaten your financial situation.

Collectors are often trained to be very aggressive and push the boundaries of the consumer protection acts that control their behavior. This can make it almost impossible to negotiate with them or have a reasonable conversation not resulting in emotional anguish. Collection calls are not about problem solving: They are about intimidating you into paying as much money as possible despite other obligations.

The threatening behavior puts people on alert and can affect sleep, health, and job performance. If you find you fear answering the telephone, it may be time to stop the calls with a bankruptcy filing.

Experiencing Budgetary Denial

Budgetary denial is when you have no idea of your income or the amounts you owe. It is a protective measure arising from the truth being too frightening because you know you cannot service your debt and pay the bills. You may not even know the total amount of your debt burden.

However, some people have a good idea. A $70,000.00 medical bill will never quit reminding you of this amount and if you have credit cards and a repossessed car in addition to that, then you already know that your debt burden is high and unmanageable. When facing this denial, add up your bills and credit statements along with your income. If your income cannot cover your expenses, consider a bankruptcy filing.

Suffering Physical and Mental Health Symptoms

If you suffer from sleeplessness, headaches, stomachaches, or if chronic health problems become worse as your finances suffer, your finances are definitely out of control. A bankruptcy filing may be the best way to preserve your health. Many people report feeling immediate relief after filing their paperwork.

Sometimes, the process of finding a way to pay debt is not worth the stress that it brings - especially if you have already cut expenses to a minimum and have no improved job prospects. Eliminating the stress that makes you sick is likely the best outcome to ensure an improved quality of life.

Trying Other Options without Success

Bankruptcy alternatives vary by resources and income. A wage earner with equity in a residence can eliminate debt through a second mortgage that often has a much lower interest rate than the original debt. Other wage earners who do not have assets can find some success through debt consolidation agencies.

Sometimes, though, the amount of debt and resources available are just not enough. Low-income debtors often consult with debt consolidation firms only to find their "low" monthly payment starts at $700.00 and that assumes a budget that is unrealistically low. Others lose jobs during debt consolidation and if the plan is not completed, all debt returns to its original levels and collection activity resumes at an aggressive rate. In worse scenarios, the agency fails to contact the creditors and the debtors face adverse action anyway.

Bankruptcy is the only legal method to completely eliminate debt obligations. There are no successful methods to cut debt in half or eliminate it for pennies on the dollar. When debt issues overwhelm all other areas of life, then bankruptcy provides relief. It may start as an embarrassing situation but once you have that fresh start, you may find yourself relieved by the peace it brings.