Just the thought of having to declare bankruptcy at some point can send shivers down your spine. Bankruptcy has been marketed as a situation people get in when they are excessively careless with their finances and have now accumulated too large a debt.
This, however, is not true. Literally speaking, bankruptcy is basically being in a state when you have accumulated more debt than you can pay off with your current income.
It does not have to be because you have been careless though, there are many reasons for going bankrupt like suffering from a debilitating medical disease, having your business go badly all of a sudden and what not.
And when you do find yourself in such a situation, declaring bankruptcy seems like a much more helpful idea because the government has a number of plans to help you out. Many people also end up bouncing back to their original lifestyle after being bankrupt so it usually isn’t so bad after all.
However, you must need to assess your situation carefully before taking this step. Here are some things to assess:
You Have Just Suffered From a Huge Financial Blow
One of the biggest reasons for people to declare bankruptcy is accumulating medical debt. The disease affects you suddenly and without warning, and sometimes even the best insurance plans cannot save your finances. Removing medical debt from credit report is a big deal and not everyone can accomplish it.
Other reasons for finding yourself in such a situation include losing your job, a drastic reduction in income, divorce, student loans, or even over-spending.
You are Missing Far too many Debt Payments
It is difficult to pay off all your debt when you hardly have any money left over from your income. Sometimes people go as far as to pay off the debt of one credit card using another card. This does nothing to help your situation but pulls you into a vicious cycle of accumulating greater debts.
Your Interest on Debts Have Sky-Rocketed
When you miss out on too many payments, the interest on your debts actually goes up. This makes it even more difficult for you to pay off your debts and at this time bankruptcy seems like a very reasonable option.
You Are Relying too much on Your Credit Card
If you find that you hardly have any liquid cash on you and you are using your credit card for the most minor payments as well like groceries and filling up your car, it might be a good idea for you to look at bankruptcy as an option.
Extra Hours a Week are not Cutting it
When one job does not help out in paying the bills we sometimes end up taking a couple of other jobs and put in a lot of hours every week. When even this isn’t a good enough solution for your debts, it might be a good idea for you to declare bankruptcy.
Collectors Call you All the Time
This alone is not a good reason to file for bankruptcy, but it can certainly help you as a wakeup call, especially if any of the other issues we have mentioned apply to you.