Are you wondering where you’re going to find the money to pay your bills this month? While the economy is in better shape now than it was a few years ago, many families are still unable to meet their basic financial obligations. Sure, most can scrape together enough to pay the most important debts. But, sometimes is seems like collection agencies are calling you non-stop and you may feel a bit of anxiety every time you pick up the phone because it may just be a debt collector.
If the above scenario sounds familiar to you, rest assured that you aren’t alone. There is a way for you to stop the collection calls and get out of financial trouble. The solution may be bankruptcy. It’s a scary thought for some people, but it might be the best way for you to get your finances under control. Here is some information to get you thinking about this often under-looked method for getting out of debt.
Signs you should consider bankruptcy
Bankruptcy is not the answer for everybody. Here are some key questions to ask yourself to help determine if it might be the right choice for you and your family.
- Are you uncertain of how much you owe? Familiarize yourself with any credit card balances and any other debt you may have. Sit down with your financial statements and a calculator and add it all up.
- Are you able to make more than the minimum monthly payment on your credit card bills? Most Americans carry at least some credit card debt. If you are making only the minimum monthly payment because you can’t afford to make more, that’s a sign that your debt might be out of control.
- Are you using your credit card for necessary expenses? If you’re using a card because it’s the only way you can pay for things like utility bills and groceries, this signals that your finances are in serious trouble. Paying for everything with a credit card is not cost-effective unless you can pay off your balance every month. Otherwise, you’re accruing debt and racking up finance charges.
- Are you getting regular calls from bill collectors? People who are on top of their monthly expenses and obligations never hear from a bill collector. If you’re getting calls at home or work asking for payments on your credit cards, utility bills or mortgage, chances are your finances are in trouble.
- Is worrying about your finances keeping you up at night? Stress and anxiety are common among people whose finances are stretched thin. If you find yourself lying awake worrying about how you’re going to pay the bills or feed your family, this is a good indication that you do not have a good grip on your finances.
If you answered yes to two or more of these questions, then it’s possible that bankruptcy might be the right decision for you and your family. Things to consider before filing for bankruptcy
Filing for bankruptcy is a big decision. Even if you answered yes to many of the questions above, there are still some things you need to consider before taking the leap.
- Are you employed and do you have a steady paycheck? If the answer to this question is yes, then you might be able to do something short of bankruptcy to get yourself out of debt. Consider a debt consolidation service. It does cost money to file bankruptcy, so cheaper and free options are a solid choice for those with the flexibility.
- Do you own your own home? If you are a homeowner, it’s important to do some research to figure out what will happen to your home if you file for bankruptcy. Depending on the size of your mortgage and the amount of equity you have, filing for Chapter 7 bankruptcy might mean that you lose your home. On the other hand, if you have a high enough income to qualify, Chapter 13 bankruptcy could help you hold on to your home.
- Are your biggest debts ones that can be forgiven by bankruptcy? Many kinds of debt can be erased by filing bankruptcy, but some can’t. Examples of debts that will follow you into bankruptcy include:
- Child support payments
- Alimony or spousal support payments
- Tax payments
- Student loan debt
- If the majority of your debt falls into these four categories, there is a chance that bankruptcy may not solve your problem. The best solution for you is to talk to either a family law attorney or a tax attorney to establish a payment plan. Are you willing and able to make payments on some of your debt? If the answer to this question is yes, then you might qualify for Chapter 13 bankruptcy. The primary difference between Chapter 7 and Chapter 13 is that Chapter 13 is considered a reorganization bankruptcy. That means that you can afford to repay some of your debts. Some people have too much income to qualify for Chapter 7. There are some advantages to choosing Chapter 13 bankruptcy over Chapter 7. The primary benefit is that you can keep your house and other assets.
- Can you afford to file for bankruptcy? This last question is a painful one for many people in financial distress. You can expect to pay a minimum of $1,500 to file for bankruptcy. It is ironic that sometimes those that need to file bankruptcy the most are often unable to afford it.
If these apply to you, consider talking to a lawyer to find what you can do about putting a halt to those collection calls. Many will give you a free consultation. Perhaps the most important thing you need to know about filing for bankruptcy is that doing so doesn’t necessarily mean that you are financially irresponsible. Sometimes, people get into financial trouble due to circumstances beyond their control. Bankruptcy protections are in place for a reason, so don't hesitate to use them to protect your family.
If you know someone who is struggling financially, please share this information with them. It may be the key to helping them get out of financial trouble.
Andrew B. Clawson of ABC Law Utah is a bankruptcy law expert. If you are suffering from crippling debt and would like to discuss your options for filing Chapter 7, 11 or 13 bankruptcy, or other non-bankruptcy options, please contact us.