Look Out For These Warning Signals
Bankruptcy lasts ten years on your credit report; so, whether or not you should file for bankruptcy is a decision that should not be taken lightly. However, if you are experiencing financial hardship; bankruptcy may be the solution for you getting a "fresh start." Therefore, I highly recommend that you contact a bankruptcy attorney before you decide whether or not to file bankruptcy. However, for your reference, I have provided a list of red flags that indicate that bankruptcy could be the best or only solution that you may have to help you overcome your financial troubles.
- 1Your Home Is In Danger Of Foreclosure-If your home is in danger of foreclosure (even if you have received a notice of sale) you can potentially save your house through a chapter 13 bankruptcy. However, to file a chapter 13, you will need a steady income that will allow you to pay your current mortgage and any past-due mortgage payments.
- 2Your Paycheck Is Being Garnished-In Nevada creditors who have judgments against you can garnish up to 25% of your paycheck. To families, living paycheck to paycheck, this is devastating. Filing for bankruptcy will stop garnishments, and if you’re able to file a chapter 7 bankruptcy, you’ll likely have all that debt from the garnishment wiped out.
- 3You Are Taking Out Pay Day Loans-Local payday loans companies can charge over 500% interest and some Internet payday loan companies have been known to charge up to 1,000% interest. Also, by taking out a payday loan now, you will likely come up short next payday. So, you’ll either extend your loan or take out another payday loan with another lender. As a result, payday loans, by design keep the borrower in constant debt. However, with a Chapter 7 bankruptcy, you will most likely be able to eliminate payday loan debt that is over 90 days old.
- 4Robbing Peter To Pay Paul-This happens when you pay one credit card by taking out a cash advance on another credit card. As long as you don’t make it a habit, transferring credit card balances to a lower interest card is not necessarily bad. However, what often happens is that you will keep on using the old credit card after the transfer balance occurs. As a result, because of the transfer, you will have two credit cards maxed out instead of just one.
- 5It Will Take You Years To Pay Off Your Debt-A bankruptcy filing does hurt your credit score. However, having outstanding debt also hurts your credit rating. Depending upon your income and the amount of debt that you have, it can take years to pay off credit card debt. This is especially so if you are only able to make the minimum payment. Also, some debt, like catastrophic medical debt (which can easily reach six figures), may realistically never be paid off. Therefore, you need to honestly ask yourself " How long will it take for me to pay off "X" amount of debt based upon my current wage?" If you discover that it will take years to pay off all of your debt, your credit rating may recover quicker from bankruptcy than if you were to wait to pay off all of your creditors. (I have, for your convenience, included a credit card payoff calculator at the bottom of this web page.)
- 6Your Car Is In Danger Of Repossessed Or Has Recently Been Repossessed-Filing a chapter 13 bankruptcy can save your car from repossession in the same way that it can save your home from foreclosure. Also, if your car was recently repossessed, you can get your car back if you file the chapter 13 before your vehicle is sold at auction. Through the automatic stay, a chapter 7 bankruptcy can also be used to help you get caught up on late payments for your car. However, you will have to make up the past due payments within the three to four months that it takes for a chapter 7 to be finalized.