Many people treat bankruptcy as the last option available to them when they face financial hardship. They may try everything in their power to find alternate solutions. They rework their budgets, take on second jobs or make use of services advertised as solutions for debt.
In many cases, those efforts are not effective, and people may end up struggling with slowly-increasing debt levels despite their best intentions. While it may not necessarily be beneficial to pursue bankruptcy for minor financial challenges, it is equally problematic to avoid bankruptcy at all costs.
There are certain signs that bankruptcy may be the best option available. What common warning signs can be indicators that filing for personal bankruptcy could be a smart move?
The risk of losing collateral property
Most people have to finance major purchases. They need a car loan to acquire transportation and a mortgage to purchase a vehicle. Those valuable assets serve as collateral for the loans used to purchase them. If homeowners miss multiple mortgage payments in a row, they could face foreclosure. If people with financed vehicles miss payments, they could be at risk of vehicle repossession. Those aggressive collection efforts can significantly worsen an individual’s financial struggles.
Service for a creditor lawsuit
When people stop making payments on their debts or cannot commit to payment plans, their creditors may take legal action. Litigation initiated by credit card companies, medical creditors and others because of debt can have major consequences. Creditors can place liens against valuable property in some cases. They can garnish people’s wages, which may only worsen their financial circumstances. Bankruptcy provides an automatic stay that typically leads to the dismissal of pending lawsuits.
An inability to balance the budget
Some people can chip away at their debts by restricting their spending. Others have already minimized most of their unnecessary expenses and cannot make any major adjustments to their budgets. In scenarios where an individual’s income is not enough for them to cover all of their minimum expenses every month, bankruptcy can be a way to correct that issue. The elimination of certain debts through a bankruptcy discharge can help people regain control over their finances.
People worried about meeting their financial obligations or collection activity may need to consider a more assertive solution for their challenges. Filing for personal bankruptcy can help people regain control of their finances.