You Cannot Stop Debt from Accumulating
One of the first signs that it might be time to file for bankruptcy is if you cannot stop debt from accumulating. This could be because you are simply unable to handle all the bills that are coming in. It could also be because the late fees, penalties and other charges on bills have put you into a cycle of revolving debt that there is no way to stop. The debt will just keep growing to the point where it becomes completely impossible to pay everything off. This is a time when you should seriously consider filing for bankruptcy.
You Have No Money for Daily Expenses
Another factor that might make bankruptcy a valid option for your household is if there is no money available to pay for daily expenses. You might be living paycheck to paycheck with no savings, no financial buffer and no way to handle unexpected expenses. Many people start using credit cards to pay for things like food. This starts a process where you are just accruing more debt, applying for new credit cards and pushing problems into the future. If you have no real money to pay for your daily expenses, then bankruptcy could be a solution.
Your Income Is Stagnant, Inconsistent or Declining
Look at your income and your future prospects. Any number of factor from changes within an industry to job loss can affect your household income dramatically. You might be making less now than you did in the past. This makes keeping up with your bills difficult or impossible. Inconsistent or declining income means that you are going to have very little money to make any changes to your financial situation in the coming months or years. Bankruptcy is your only option if you no longer make enough to pay down the debts you already have.
Creditors or Collection Agencies Are Seeking Legal Action against You
A clear sign that it is likely time to file for bankruptcy is if creditors or collection agencies are seeking legal action against you. This occurs after you have been unable to pay your debts for months or years. The result of legal action can be very detrimental to your life. It can lead to wage garnishment or other punitive actions. Filing for bankruptcy will potentially stop these legal actions so that you can regain your financial footing and start fresh.
You Are Facing Imminent Foreclosure
Financial problems could lead to foreclosure on your home. This can leave you without a place to live. You could lose everything you invested in the house. Filing for bankruptcy can temporarily halt the foreclosure process in many cases if your household has become financially insolvent. Bankruptcy could put you in a special position where you can renegotiate your mortgage and keep your home.
Budgeting and Financial Counseling Does Not Help
Some people go to extreme lengths in order to avoid bankruptcy. This can include creating and following harsh budgets that include the absolute minimum for food and no money for anything beyond the bare necessities. Other families go to financial counseling services in order to try to figure out what changes could solve the debt problem. If budgeting and financial counseling does not help, then there is a very good chance that bankruptcy is your only option to restore your financial stability.
Creditors Will Not Negotiate
A final sign that bankruptcy should be seriously considered is if your creditors will not negotiate. This means the creditors will not work with you to create payment plans, consolidate your debt or do any type of debt settlement. Those creditors are going to do everything possible in order to get the money that you owe. If you can no longer negotiate with creditors, then bankruptcy is your only option to resolve your debt.