Filing for bankruptcy is a big life choice, so understandably, you may view this decision as an absolute last resort. However, knowledge is power, and knowing when it’s time to file for bankruptcy can save you from unnecessary stress and struggle. To help you avoid any more undue financial anxiety, let’s review the signs that indicate it’s time to consider filing for bankruptcy.
You’re Spending More Than You Earn
As a general budgeting rule, 50 percent of your total income should go toward food and shelter, 30 percent toward wants and luxuries, and 20 percent toward savings and repaying any debts. This is the 50/30/20 rule. Now, of course, not everyone can adhere to this rule, and it’s OK to exist in a fluctuating range. However, if that 20 percent starts hiking up into the high 30s or 40s, you may have a problem. If you keep incurring debt, interest rates keep going up, and you can’t get a solid hold on your money, it might be time to consider filing for bankruptcy.
You Keep Getting Collection Calls
If you haven’t repaid your debt after a certain amount of time, a creditor will give your account to a collections agency. Receiving these calls over and over again is undoubtedly frustrating, but it’s important to remember that they’re not personal. In fact, if you keep getting calls, it’s a solid sign that it may be time to consider filing for bankruptcy. Don’t forget that the longer you ignore debt collectors, the more likely they are to file a lawsuit. The last thing you want on top of your debt is to have to pay for court and legal fees.
You’re Struggling To Pay for Basic Necessities
Remember, a majority of your budget should go toward paying for basic necessities, but if you find yourself skipping bills to meet your needs, bankruptcy may be your best option. This is especially true if you’re consistently using credit cards to pay for basic needs. In doing so, you’re continuously racking up debt, putting yourself in an even more complex financial state. Unfortunately, this sticky situation happens to many people, and they often believe that they can’t file for bankruptcy if they don’t have anything to give–but this isn’t true. There are different types of bankruptcy that you can file for to help you get back on your feet.
You’re Using Up Your Savings
Using your savings, like retirement money, to pay off your debt is never a good option. That money is there to ensure your future financial security or the financial security of your children. You may even receive a penalty on your account for prematurely dipping into your savings. Taking away from your future should be your last resort, not filing for bankruptcy. Declaring bankruptcy can save your financial future and take control of your finances once and for all.
