Every year in California, tens of thousands of people file some type of bankruptcy to obtain relief from debt. On the other hand, countless individuals and businesses work extraordinarily hard to avoid bankruptcy, hoping to pay off their debts and achieve financial prosperity in the way that society expects. Even those who sorely need relief try to delay it for as long as possible because of harmful bankruptcy myths.
In truth, bankruptcy is a powerful way to eliminate debt, but everyone’s situation requires a unique strategy. To help you consider, here are 7 signs that may mean it’s time to file.
1. Your Balances Aren’t Going Down.
Are you only able to make minimum payments on your debt? Are your payments going entirely toward interest? Are you having to use credit cards for basic necessities or emergency expenses? You might know that this situation isn’t sustainable, but you might also feel as though you have no other choice but to keep fighting. If this is your experience, bankruptcy might be the right next move.
2. You Are Selling Your Possessions & Draining Your Accounts to Pay Debt.
Did you know that, when you file bankruptcy, you will most likely be able to keep everything you own? Many people believe that bankruptcy will strip them of all their possessions, but this is rarely the case. Every state has a set of bankruptcy exemptions that filers can use to protect most or all of their assets, retirement accounts, savings accounts, and other personal property. Before selling what you own and depleting your funds, consider how bankruptcy may provide relief from debt without jeopardizing your financial security.
3. Collection Agencies and Creditors Are Constantly Calling You.
When you fall behind on payments, creditors and debt collectors may begin to call you regularly and even send you texts, emails, and letters. These constant demands can be enormously frustrating, especially if you simply don’t have the money they are requesting. What’s worse is that the demands may be the first step toward more serious consequences, such as a lawsuit. Fortunately, bankruptcy can immediately end these demands and prevent other types of debt collection.
4. A Lender or Debt Collector Has Sued You.
If you stop making payments toward credit card debt, medical bills, rent, and other unsecured debts, you may find yourself facing a lawsuit. If you lose, the judge may allow the lender or debt collector to garnish your wages, freeze your bank account, or place a lien on your property. Bankruptcy, however, can stop the lawsuit, and it can even put an end to the consequences of a finalized court judgment.
5. Most of Your Debt Is Unsecured.
The biggest benefit of bankruptcy is the debt discharge, which eliminates your liability for qualifying debts. The court can discharge many different types of debt, but this process is most beneficial when the debt is unsecured.
Some common examples of unsecured debt include:
- Medical bills
- Back rent
- Unpaid utility bills
- Credit card debt
- Payday loans
These debts are considered unsecured because the creditor or debt collector does not have a legal claim to any of your property, and they will not be able to seize your property after the court discharges your debt. Mortgage debt and automobile loans, on the other hand, are examples of secured debts, which means a debt discharge will not automatically protect you from foreclosure or repossession.
6. You Are on the Verge of Losing Your House or Car.
Because mortgages and automobiles are forms of secured debt, these lenders have the contractual right to foreclose on your home or repossess your car as soon as you fall behind on payments. Bankruptcy, however, can immediately prevent foreclosure or repossession if you have defaulted on your mortgage or auto loan. You can then use bankruptcy (namely, Chapter 13) to catch up on delinquent payments and eliminate the threat of losing your most important assets.
7. You Can’t See a Way Out of Debt
Unless you have a substantial pay raise on the horizon, the idea of paying off all your debt in a reasonable amount of time may be laughable. If this is the case for you, there is no reason to feel ashamed. You are in good company, as Americans collectively owe about $1 trillion in credit card debt. And this is exactly why bankruptcy exists. No one deserves to live an entire lifetime struggling under the weight of unmanageable debt.
The more of these 7 factors you are experiencing, the more likely it is that bankruptcy is the right move. However, every person’s situation is unique, and you will greatly benefit from the insights and advice of a skilled attorney.
Let’s Discuss Your Situation Together
Especially because of the COVID-19 pandemic, millions of Americans are struggling to maintain their financial footing. You may have received local, state, or federal aid, but no one can be sure of whether more aid will come in 2021.
At Nguyen Law Group, we help our clients take proactive steps toward financial freedom. Bankruptcy is a tremendous help for many of the people we serve, and we look forward to helping you implement the best possible legal and financial strategy for your situation.