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Is it time to file personal bankruptcy?

Is it really time to file for personal bankruptcy? Should you try waiting a little longer while you lock away the credit cards and tighten your budget to see if you can get your finances under control?

Ultimately, you have to make the decision whether or not to file for bankruptcy on your own, but there are some good signs that continuing to try to get your finances in order is merely delaying the inevitable:

1. The minimum balance on your credit cards is all you can pay.

That's a good sign that you're too financially strapped to make any real progress toward solvency.

2. You owe more than you can possibly pay off in two years.

Experts suggest using a two-year test because it takes about that long to repair your credit after bankruptcy. If you're struggling for nothing, the struggle probably isn't worth it.

3. You've fallen behind on multiple accounts.

Anyone can forget to pay a bill for a month -- but if you're routinely behind on your bills or behind on most of them, the interest and penalties are adding up. Plus, each month you're behind is another ding on your credit.

4. You owe a lot more than it takes to file bankruptcy.

Filing bankruptcy is no financial picnic. It costs to file and it costs to have an attorney and it will cost you in terms of higher interest rates as it impacts your credit score. However, if you compare the fees to your monthly debts and realize that bankruptcy is actually the cheaper option, it's probably time.

5. You're drowning under a sea of debt collectors.

If the debt collectors are hounding you day and night, your wages are being garnished or you've just been served with a lawsuit from a creditor -- think about acting now rather than later. You're probably long past the tipping point where you should have filed Chapter 7 a while ago in order to protect yourself and your future.

Remember that bankruptcy isn't an ending -- it's actually the beginning of a new start in your life.

Source: Smartaboutmoney.org, "Weigh the Costs and Benefits of Bankruptcy," accessed Oct. 06, 2017

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