How will I know when I need to file bankruptcy?

Published on October 6, 2021 by Frances Tomes

You will know it is time to file bankruptcy when you are overwhelmed by debt and unable to reduce your debts at a reasonable pace.

You may have lawsuits filed against you, and garnishments against your wages, tax refunds, and even bank accounts. Your assets may be threatened with seizure. You may have a lien against your house. Creditors will be calling regularly, and you will have not have the means to satisfy them.

Here are three levels of financial stress at which you should at least be considering bankruptcy:

1. It is time to trim expenses, negotiate with creditors, and start thinking about bankruptcy if you:

Only pay some bills each month and wait to pay others
Receive calls from collection agencies
Do not have health insurance
Have little or no savings
Have been out of work for a month or more

2. Unless you can quickly remedy the situation, plan to see a bankruptcy lawyer if you:

Are behind two or more months on your payments for two or more debts
Have lawsuits pending for unpaid accounts
Owe taxes you cannot pay
Have been out of work for three or more months
Are using new credit cards to pay the minimums on old credit cards
Have high medical bills not covered by insuranc

3. Consider filing for bankruptcy immediately if your:

Wages have been garnished
Bank account has been attached
Home is set for a foreclosure sale
Car has been or is about to be repossessed
Unemployment benefits are ending

You need not wait until these disasters happen. If you see them looming ahead, you are better off filing for bankruptcy earlier than later. You will preserve more assets and your credit record will be more easily repaired.

Don’t stress about filing for bankruptcy. Life afterwards can be much better. Check out our free resource on success after bankruptcy.