When things don’t go as planned and you find yourself in a situation where your debt is consistently higher than your income, experts recommend considering filing for bankruptcy.
Specifically, your should declare bankruptcy when:
- You have to pay for daily necessities with your credit cards. You have no cash pay your grocery or utility bills and you have to add on to your debts to afford bare necessities.
- You’re missing out on your payments and the interest rates are climbing. Most lenders, specifically credit card companies will hike the interest rates. Once they go as high as 30% you’d be paying mostly interest with the principal amount barely diminishing.
- You’re already working multiple jobs to make ends meet. This may work for some as long as they are able to pay for their utilities with the extra income; but if the debt is already above your head only extreme measures can help you counter it.
- You’re paying off one credit card using the credit limit on the other. You’re only stalling and delaying your debts. This will not bring the total amount of your debt down.
- Your wages are being garnished. Although this stipulation would allow lenders to directly take money from your paycheck only if you’re earning at least 40 times the amount of minimum wage every week; it will never be enough money to get through the rest of the expenses.
- You’ve drained all your accounts, even the retirement account (or are thinking to tap it). Retirement accounts are protected under bankruptcy declaration and shouldn’t be withdrawn to pay off debt.
The benefits of bankruptcy are plentiful:
- You will have cleared yourself of all credit card debt (called automatic stay), allowing your household income to grow instead of diminish.
- If you have IRS debt, depending upon the circumstances, you may be able to have some of that debt removed.
- Threats of lawsuits and garnishments will terminate.
- Collection calls and letters will cease.
- You may be able to keep your property (cars, your home, etc.).
- You have the opportunity to rebuild good credit over time.
Declaring bankruptcy is a major decision, but at times it is the only solution; however, It is not an end, but a new beginning and what’s most beneficial is gaining peace of mind.