Recent changes in bankruptcy laws make it more difficult for people to file. In 2015, nearly 900,000 people filed for bankruptcy.

Bankruptcy filers aren’t always people who mismanaged their finances. Many suffer major health crisis’ or a life event, such as divorce or losing their job. Economic climate also resulted in record numbers of foreclosures—another factor in growing bankruptcy rates where every demographic is represented.

Many people still see bankruptcy as their only solution to a financial crisis. While it might be the best choice for some, it is not an easy fix for debt. People that file bankruptcy should know that the decision has long-term effects and many consequences.

Early warning signs

Look for serious financial problems. This can help avoid bankruptcy in the future.

Missed payments month over month

Missed or late payments may mean you are not keeping track of when bills are due or, more seriously, you cannot pay. Find out why and adjust your spending as soon as possible.

Overdue out credit cards

Do not use credit cards to extend your income. Look closely at your expenses and make sure your income covers it.

Minimum payments

Paying the minimum on your credit card debt will result in more than a decade of payments and usually thousands of dollars in interest. Even $10 extra per month can decrease the amount of interest and time to pay off your credit card debt.

An interruption of income causes a crisis

The simplest way to avoid this is to have 3-6 months of savings set aside for living expenses in case of an emergency. If you do not have, a savings cushion, start today with whatever amount you can afford per month. It adds up over time, set it aside.

When to consider bankruptcy

It might be time to look at bankruptcy if you have one or more of these issues:

  • Facing foreclosure
  • Debts greater than one year’s gross income
  • Garnished wages to satisfy unpaid debts
  • Constant collection phone calls
  • 30+ days behind on bills
  • Repossessed property, such as a car or boat
  • Medical bills not covered by insurance

The decision to file for bankruptcy can be very personal. It’s helpful to seek advice from professionals, such as credit counselors or attorneys, but please weigh all the information before moving forward!

 Contact me for legal advice.