The word “bankruptcy” may send some people into panic mode. However, it is not always a negative thing when a person files for bankruptcy. In fact, during a time of extreme financial distress, it may be the lifeline that you need. Bankruptcy can help a person get a new financial start. However, there are some cons to filing bankruptcy such as a decrease in your credit score and difficulties in obtaining financing. Also, the process to file can be long and exhaustive. But, if you want to know when to declare bankruptcy, there are several reasons why filing may be your best solution.
Too Much Credit Card Debt
If you do not have cash on hand to pay for your daily expenses and you must use credit cards for every day financial transactions, you are probably going through a financial hardship. Another way you may know you are having financial difficulties is if you are paying off one credit card debt with another credit card. An accumulation of these factors may be the signals you need to know when to declare bankruptcy.
Unemployment/Job Loss
Bankruptcy filings typically increase during economic recessions. Companies terminate or lay off employees, and employees are no longer able to pay debts and loans that are owed to creditors. In fact, job loss is one of the most common reasons why people decide to file for bankruptcy. Some people choose to consolidate bills such as credit card debt.
However, when they become unemployed, these bills are no longer paid. As a result, they are left with two options. They can either sell some of their personal belongings to pay off debts, or they can decide to declare bankruptcy.
High Interest Rates
Some lenders will increase interest rates when a debtor misses one or more payments. If you are having difficulties paying off your debts when the interest rate is low, you will be under more financial strain if the interest rate on your loans is increased. Not only will it be more challenging for you to pay off your loan, the increased rate will also extend the life of the loan. This means that if you cannot pay off the loans with the higher rate, or negotiate a lower rate with the lender, your only other choice may be to declare bankruptcy.
Consult with an experienced bankruptcy attorney to discuss when to declare bankruptcy based on your individual circumstances. It may be the step you need to take to change your financial situation.
For more information about bankruptcy and other debt relief options, contact Douglas Jacobson Law Firm for a free consultation.