The fight to regain financial stability following unusually big expenditures or devastating losses can exhaust even the most hardworking of us. Digging to get out of debts day in and day out can be emotionally and physically draining and despite your best efforts, you may not be any closer to debt relief. You could be on the verge of declaring bankruptcy without even realizing it.
Bankruptcy is not the financial "death sentence" that many people believe it to be. When you declare bankruptcy properly, it could help you get rid of your debts for good and stop an aggressive creditor in his or her tracks. Best of all, you could get your credit back on track and, in certain cases, maintain your valued assets like your business or home.
Success is entirely dependent on proper planning — thus, you should know how to spot some of the common evident indications of imminent bankruptcy in your life. This blog describes and underlines the warning signs that you could be on the verge of declaring bankruptcy.
Understanding The Basics Of Bankruptcy
Filing for bankruptcy is a complicated process that an average person is unlikely to be able to navigate alone. Partnering with a professional bankruptcy lawyer can guarantee that your bankruptcy runs smoothly and that you follow all of the appropriate bankruptcy rules and regulations.
You'll also need to fulfill some conditions before filing for bankruptcy. You should show that if you are unable to settle your debts and need to file for bankruptcy, you will undergo a credit counseling session with a credit counselor approved by the government. The counselor shall assist you in assessing your financial situation, discussing bankruptcy alternatives, and developing a personal budget program. If you opt to file for bankruptcy, you would commonly choose whether to petition under Chapter 7 or Chapter 13.
Both Chapter 7 and Chapter 13 bankruptcy will help you get rid of unsecured bills like credit cards, stop repossessions and foreclosures, stop debt collection activities, stop utility shut-offs, and halt wage garnishments. Both types require you to cover your own attorney’s fees and court costs. However, these 2 kinds of bankruptcy work in different ways to help people get out of debt.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy, also termed as "a straight bankruptcy," is most people's first choice when filing for bankruptcy. You will be required to allow a trustee appointed by the bankruptcy court to monitor sales of any non-exempt property or assets, such as work-related equipment, cars, and basic household furniture, to mention a few.
The key component in liquidation is determining which assets are actually non-exempt. Debtors are able to use exemptions, generally found in the California Code of Civil Procedure, to protect certain assets. If any asset is protected (i.e., exempted), the court appointed trustee is not able to liquidate that certain asset. For any asset that is not protected (i.e., non-exempt), the court appointed trustee would have the ability to liquidate it.
The proceeds from the sales, if any, will be used to settle your debts. After the bankruptcy is completed, a discharge is issued any dischargeable debt is ultimately discharged (i.e., eliminated). Certain types of debts are not eligible for discharge via Chapter 7 bankruptcy. You'll still be required to pay child support and alimony, as well as certain taxes and school loans.
A Chapter 7 bankruptcy has serious consequences. To begin with, if you get into more debt, you will not be eligible to petition for Chapter 7 bankruptcy for another 8 years from the filing of the prior Chapter 7. In cases where you have non-exempt assets, you’d be required to give those up for the benefit of the creditors. Moreover, the bankruptcy would likely remain on your credit for a period of 7 years. If you are looking to purchase a home, most lenders require a 2-year waiting period from the chapter 7 discharge.
Chapter 13 Bankruptcy
Declaring bankruptcy under Chapter 13 works a bit differently, enabling you to retain all possessions or property, exempt or non-exempt, in return for paying your obligations in part or in full. The court and your bankruptcy lawyer will work out a 3 to a 5-year repayment schedule. Based on what is agreed upon, you could opt to repay part or all of your debts over that timeframe, depending on your financial situation. When you finish the agreed-upon payment schedule, you receive a discharge as you would have in a chapter 7, regardless of whether you only paid a portion of what you initially owed.
While any sort of bankruptcy will harm your score, a Chapter 13 bankruptcy could be a better option. You could be able to keep all of your assets by opting to go chapter 13 rather than chapter 7.
Signs You Are On The Verge Of Bankruptcy
Below is a list of some of the warning signs to look out for:
You Have A Hard Time Saving Money
Saving is a vital aspect of life that's made possible when you put in time and effort at a job. If you're unable to save for your home, travels, retirement, or any other aspects of life owing to outstanding debts, it is necessary to rethink bankruptcy. People may discover that debt consolidation and partial debt discharge will help them save money as well as have the time of their life in a new way.
When you file for bankruptcy, you don't necessarily have to lose everything you own. There are alternatives for those with steady incomes to resolve their debts for less and spare some money for retirement savings and other goals.
Your Credit Cards Are Almost Full or Have Reached Their Maximum Limit
If you rely on credit to cover your living expenses, you should be aware that your credit limit will be hit at some point. Once you've reached or exceeded your credit limit, you could find yourself postponing important bills and accruing debts as a result of the credit card’s shortfall. If you're living on credit, it's likely time to consider filing for bankruptcy.
Once all your loans and bills have been discharged by the bankruptcy court, your lenders will be unable to demand payment from you. Often, your lenders will realize your tough situation and thus will offer you a payment option that will allow you to get your finances back on the right track. After examining your monthly expenses and exploring all other options for getting a handle on your debts, you need to consult a professional bankruptcy attorney to look for strategies that will offer you debt relief.
You Used Home Equity Loans To Settle Unsecured Debts
For some people, it could seem reasonable to settle a line of credit with home loans, which can combine all of your debts. However, using home equity loans to cover credit cards is only a viable choice if you can afford the monthly payments of your mortgage and at the same time settle your credit cards. If you're a homeowner thinking about filing for bankruptcy, you should consult with a local bankruptcy attorney who can explain and take you through the bankruptcy rules and process.
If you're eligible for Chapter 13 bankruptcy, you could be able to maintain your house while paying down some of your debts. If you apply for Chapter 13, you should devise a repayment plan that includes full payment of certain lenders. A bankruptcy court will have to approve your repayment plan according to the Local Rules of the Bankruptcy Court and the Federal Bankruptcy Rules.
You Acquired A High-Interest Loan
In some cases, people who are deeply in debt perceive high-interest loans as the only way out. If you already have debt, a "payday" loan will simply make things worse. What many people fail to realize is these "quick loans" have exorbitant interest rates. If you study the fine print, you can come across loans with interest rates that are much above 180%.
On average, you don't want loans with annual percentage rates (APR) greater than 25 percent. If you pass the requirements, a consolidation loan can offer significantly lower APR as compared to a fast "payday" loan. Taking out a high-interest loan will increase your unsecured debts and thus it's not recommended for someone trying to recover from debts.
Debt Collectors Start Calling You
Debtors' accounts are assigned to a debt collector if they delay in making payments for a monthly bill or are thirty to ninety days past due. Past-due accounts are listed on credit records and they could be charged off. If your account is charged-off, you could face legal action and be obligated to clear the amount owed right away.
The debt collectors will try to reach out to assist you in resolving your account. If the debt collectors are calling you and you're not in a position to pay them, you really ought to consider declaring bankruptcy. Paying the bare minimum to avoid a charge-off is insufficient to restore your account into good standing. Declaring bankruptcy and exploring low-repayment options could be of greater assistance to debtors.
You Are Ineligible For Debt Management Plans Or Consolidation Loans
A debtor can benefit financially from a consolidation loan and/or other loan repayment options offered by creditors. Consolidation loans and other debt management programs feature lower monthly installments and, in some cases, debtors could well be relieved of some obligations. However, if a debtor's credit score falls below a certain threshold, he or she would be denied consolidation loans or a debt reduction program. If a debtor is not eligible for the debt repayment plan or consolidation loans, then bankruptcy could be their ultimate alternative.
You've Been In An Accident That Has Rendered You Unable To Maintain A Sustainable Flow of Income
Most hardworking people are highly prone to work-related accidents. In some cases, injuries from work could be reimbursed through workers' compensation. Nevertheless, the wage replacement under the workers' compensation cannot be sufficient to meet the debtor's entire financial commitment. It's even worse when you get physical harm that causes you to lose your job and you get no compensation. For people in this scenario, bankruptcy can be a viable and advantageous option for restoring their credit.
You’re Unable To Reduce Your Debts With Your Existing Monthly Income
Making minimum monthly installments is a good technique to get your credit delayed for a long time. A debtor's monthly earnings should allow him or her to settle all debts while also allowing him or her to save money. If the debtor only pays the minimum amounts for each monthly bill, he or she is probably ignoring other obligations or fees that come with homeownership or owning a car. If you're unable to repay your debts, you do have several options to assist you to regain control of your finances. Preparing a monthly financial budget to assist you to handle your expenses, earning an extra job, or taking out consolidation loans are some of your options.
If all other options have been exhausted and you're only able to cover the bare minimum of expenses, you could opt to file for bankruptcy. Declaring bankruptcy if you're in a similar position shouldn't frighten you. If you have a recurring income source, you could be eligible for Chapter 13 bankruptcy, which allows you to create a repayment schedule while keeping your property and possessions. For many people, a fresh start via bankruptcy will provide a viable solution to creating a decent credit rating and a solid economic standing.
You Forgo Essential Bills To Settle Secured and Unsecured Debts
Individuals who develop a monthly budget that is fruitful can pay off their debts by discovering where their cash is most productive. If you notice you're reducing your necessary bills or your living costs such as water, gas, power, rent, or food, you could be reducing your usage or other supplies to save money. However, dramatically reducing other expenses can lead to debt accumulation and other problems. You need to have sufficient money to pay your bills, cover your living expenses, and other necessities.
If you notice that you're minimizing your living expenses by foregoing regular car services and/or by not getting healthcare insurance, you definitely should think of declaring bankruptcy. People should not brush aside basic living necessities to settle their debts. If you're having financial difficulties as a result of your earnings and debts, you could be eligible to have a portion or all of your debts erased. This allows you to clear your creditors while continuing to lead a healthy life unaffected by your financial situation.
Find A Sacramento Bankruptcy Attorney Near Me
Filing for bankruptcy is a hard call but it could be your best option for getting rid of debts you can't pay. Many innocent and hard-working people have become swamped with debts as a result of job loss or having to manage credit card obligations. These people eventually find it difficult just to purchase groceries and other basics due to the economy's struggles over the past several years. Take control of your finances and seek out help.
If you're considering filing for bankruptcy and are in the middle of litigation or any financial hardship, call Sacramento Bankruptcy Lawyer Paul deep Bains at 916-800-7690. Our experts can safeguard your possessions and property to the utmost degree possible under the law.
