What Are Signs That You Should File for Bankruptcy?

Debt can quickly spiral out of control, leaving you overwhelmed and unsure of what to do next. While filing for bankruptcy may seem like a drastic step, it can provide much-needed relief for those in financial distress. Recognizing when it is time to consider bankruptcy is crucial for protecting your assets and moving toward a fresh start. Below are several signs indicating bankruptcy might be the right decision for you.

You Are Only Making Minimum Payments on Your Debt

If you are consistently making only the minimum payments on your credit cards or loans, it may be a sign that your debt is unmanageable. Minimum payments often cover little more than the interest, leaving the principal amount unchanged. Over time, this can make it difficult to reduce your overall debt. In this situation, bankruptcy could provide a way to eliminate the bulk of your debt and give you a fresh start.

You Are Using Credit Cards to Pay for Necessities

Another clear sign that bankruptcy might be necessary is if you are relying on credit cards to cover basic living expenses. This includes paying for groceries, utilities, or rent. Using credit cards to meet daily needs typically signals that your income is insufficient to cover your expenses. As your credit card balance grows, it becomes increasingly difficult to manage, often leading to a financial crisis. Bankruptcy can offer a path to restructure or discharge your debt, allowing you to regain financial control.

Debt Collectors Are Calling Regularly

When debt collectors start contacting you frequently, it is a strong indicator that your financial situation is out of control. These calls can be stressful and constantly remind you of your growing debt. Bankruptcy can provide relief by halting collection efforts through an automatic stay, which prevents creditors from continuing to pursue payment while the bankruptcy is being processed. This legal protection can offer you immediate relief from the pressure of constant collection calls.

You Are Behind on Your Mortgage or Car Payments

Falling behind on your mortgage or car payments can put your most important assets at risk. If you are in danger of foreclosure or repossession, it may be time to consider filing for bankruptcy. In some cases, bankruptcy can allow you to keep your home or car while reorganizing your debts through a repayment plan. This can provide you with more manageable monthly payments and allow you to avoid losing your property.

You Have Significant Medical Bills

Medical debt is one of the leading causes of bankruptcy in the United States. If you are facing overwhelming medical bills that your insurance will not cover, bankruptcy may be a viable option. Filing for bankruptcy can help discharge medical debts, relieving you from bills that could take years to repay otherwise.

You Have Exhausted Your Savings

You might want to consider bankruptcy if you have drained your savings account to pay off debt or cover living expenses. Living without any financial safety net can be dangerous, leaving you vulnerable to unexpected expenses such as car repairs or medical emergencies. Bankruptcy can allow you to discharge debts and start rebuilding your savings.

You Are Borrowing Money to Pay Off Other Debts

If you have resorted to borrowing money from friends, family, or payday lenders in order to pay off existing debts, this is a sign that your financial situation has become unsustainable. This practice can create a vicious cycle of borrowing that only leads to deeper financial trouble. Bankruptcy can help you break this cycle by eliminating or reducing your debts, allowing you to avoid borrowing just to stay afloat.

Your Wages Are Being Garnished

Wage garnishment occurs when your employer withholds a portion of your paycheck to pay off a debt. If your wages are being garnished, it is a clear sign that your debt is out of control. Filing for bankruptcy can stop wage garnishments, giving you back control over your income. This can be particularly helpful if garnishment is making it difficult to cover your basic living expenses.

You Are Considering Drastic Measures to Pay Debt

If you are thinking about drastic measures like selling your home, cashing out retirement accounts or liquidating other essential assets, it may be time to consider bankruptcy. These measures can have long-term consequences on your financial well-being. Bankruptcy can protect your essential assets, such as retirement savings and your home while giving you a chance to eliminate or restructure your debts.

You Feel Constant Stress or Anxiety About Money

The emotional toll of debt can be just as overwhelming as the financial burden. If you constantly worry about money, lose sleep, or feel stressed about paying your bills, it may be a sign that your debt has become unmanageable. Filing for bankruptcy can provide relief by helping you regain control of your finances and reducing the mental burden of debt.

The Somerville Bankruptcy Lawyers at Lyons & Associates, P.C. Guide You to a Fresh Start

Bankruptcy is not a decision to take lightly, but it can provide significant relief for individuals drowning in debt. If you recognize any of these signs in your own financial situation, it may be time to consider speaking with a bankruptcy attorney to explore your options. Speak with the Somerville bankruptcy lawyers at Lyons & Associates P.C. about how we can help you. Contact us online or at 908-575-9777 for a free consultation. With offices in Somerville, Morristown, and Freehold, New Jersey, we serve clients in Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, Morris Plains, and Monmouth County.