Do You Recognize the Early Warning Signs of Bankruptcy?

If you have ever faced financial difficulty, you know how difficult it is to deal with collection calls, wondering how you will get out of debt. For many people, bankruptcy offers a fresh financial start. Too often, however, people often wait too long to file, suffering with the stress of financial hardship, because they are unaware of the early warning signs that they are headed to bankruptcy or will be better off if they file.

Consistently Missing Payments

If you are missing payments on a regular basis, especially if you are having difficulty paying for major items, like your home or your vehicle. Having difficulty paying even the minimum payments on credit cards is another of the early warning signs of bankruptcy.

Unable to Qualify for Debt Management

There are several credit counseling agencies and non-profit organizations who offer debt management. These companies negotiate with your creditors for lower interest rates and arrange payment plans so that you pay your debt off faster. However, if you don’t have enough income to even cover reduced payments, you may need to consider bankruptcy.

No Home Equity Options

If you owe more on your home than it is worth, you have negative home equity, which means you are not eligible for a home equity loan you could use to reduce debt. Unfortunately, some people pay off debt with a home equity loan and then charge themselves back into debt, causing even more problems financially.

Constant Debt Collection Calls

Another of the warning signs of bankruptcy is constant debt collection calls. You may also be receiving notices in the mail stating that a creditor is planning to take legal action, which they can do in most states. Legal action could lead to wage or account garnishment.

Turning to High-Cost Loans

Although credit cards often come with high interest rates, other types of loans can be even more costly. If you are turning to payday or vehicle title loans, which usually have interest rates of over 200 percent or more, you may want to consider bankruptcy.

Using Credit to Buy Essential Items

Using a rewards card to pay for gas or groceries and then paying the bill each month actually makes financial sense. However, one of the early warning signs of bankruptcy is purchasing necessities using credit cards and not being able to pay the bill in full each month.

These are just a few signs that you may be headed for bankruptcy or that bankruptcy may actually help you financially. It is important to discuss your circumstances with a bankruptcy attorney to learn whether filing is right for you.