Most people see bankruptcy as their last resort when faced with a severe amount of debt. Although it’s commonly associated with failing businesses, individuals can also file for it when needed.
However, declaring bankruptcy can be expensive and time-consuming at the same time. Even more, it also has a considerable impact on a person’s credit score. But when done right, it can save you a lot of money and help you recover financially. It can even prevent the foreclosure of your Salt Lake City property.
<>To ensure that you get the most out of it, you need to learn the basics of bankruptcy, its types, and why someone needs to file for it.
The basics about the bankruptcy process
Bankruptcy is a legal option for individuals, families or businesses that are unable to pay off their existing debts. The process is tedious, as the bankruptcy courts will go through your current obligations and liabilities and track your existing assets as well.
Once they’ve tracked all your properties and assets, there’s a chance that they’ll use a few of your assets as repayment. After the process is complete, your debts can be reduced or get fully paid altogether.
The main purpose of the entire legal process is to give individuals a chance to start anew. Remember that debts will only continue to grow and amass even more interest charges if left unpaid. Thus, making it harder for you to pay it off.
If the bankruptcy process goes as planned, you’ll have a better chance of starting fresh without any debts to worry. But how will you know when it’s time to file for bankruptcy?
When to move forward with bankruptcy
If you feel like your debt is way out of your control, then it’s time for you to file for bankruptcy before it becomes problematic. Below are a few red flags that you need to watch out for to know if your financial status is indefensible.
You’re charging your basic needs on your credit cards – If you’re consistently putting the groceries or gas on your credit cards because you don’t have any cash handy, then you’re only adding more to your debt. People often do this if their entire paycheck goes directly to debt payments.
You’re missing a couple of payments – It’s hard to get out of debt when interest rates are at their highest. But if you’ve missed a couple of payments, most credit card companies will even increase your rate for up to 30% more.
Once the standard reaches that height, then almost all your payment goes towards the interest rate instead of going towards the principal. Plus, interest rate hike only increases your monthly payments, making it even harder for you to pay it on time.
You’re working multiple jobs – Most people would go through great lengths to finish off their debt. If taking on other jobs helps you pay your monthly bills, it’s a great start. But if you’re so heavily in debt that working multiple jobs isn’t denting it, it’s best to consider other ways to manage it.
Declaring for bankruptcy is a significant financial decision that you need to make. Although it aims to help you get back on your feet, you could end up in a worse financial situation if done inappropriately.