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. One such con is 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 reasons why filing may be your best solution.
Too Much Credit Card Debt
If you use credit cards for everyday financial transactions because you don’t have cash, 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 signal you need to know when to declare bankruptcy.
Unemployment/Job Loss
Bankruptcy filings typically increase during economic recessions. Companies terminate or lay off employees. Consequently, employees are unable 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 with a low interest rate, you will be under more financial strain if the interest rises. It be more challenging for you to pay off your loan. In addition, the increased rate will also extend the life of the loan. Hence, if you cannot pay off the higher rate loans, or negotiate a lower rate with the lender, you may have 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 how bankruptcies work and other debt-relief options, contact Douglas Jacobson Law Firm for a free consultation.
Can You File Credit Card Bankruptcy?