Bankruptcy can be a great tool for handling financial hardship and giving you the fresh start you need. However, most people who file for bankruptcy don’t do so at the right time. This means that while they do benefit from bankruptcy, they don’t get all of its benefits. How do you determine when to file for bankruptcy? It’s not easy, but here are a few tips that will help you see if now is the right time.
You’re Using Credit Cards to Pay for Necessities
You should rarely, if ever, be using your credit cards to pay for groceries, gas, and other necessities. If you’re spending so much of your income on debts that you don’t have enough left for necessities, bankruptcy can help you restructure that debt. This can lower your monthly payments so you don’t need to rack up more debt just to get by.
You’re Using Your Retirement Funds for Bills
Sometimes, emergencies come up, and the only way of dealing with those emergencies is to dip into your retirement funds. Paying your monthly bills, however, shouldn’t be one of those emergencies. If you’re using retirement funds every month to make up the difference in what you make and what you owe, bankruptcy may be the solution. Again, restructuring those debts can be the key to avoiding financial ruin.
Your Annual Income is Less than Your Revolving Debt
Revolving debt is any type of debt that doesn’t have an end date. This includes credit cards, home equity loans, and personal credit. You make payments every month, but there’s no set term for the loan to be paid off. If you add up all of this debt and it’s more than you make in a year, you need financial relief. Bankruptcy is ideal for people in this situation.
Nothing Else Has Worked
Have you tried consolidating debt, refinancing, trying to increase your income, and other solutions, but are still falling further and further behind? If so, don’t be afraid to explore bankruptcy. It may be the right move, and if you do it before you get behind on payments, it won’t do as much damage to your credit as you may think.
Michael F. Kanzer & Associates can help you determine if bankruptcy is the right move. Contact us today to set up a free consultation.