Recognizing the Bankruptcy Warning Signs

One of the reasons why people wait so long to file bankruptcy is because they are overly concerned about what it will do to their credit. There are a number of bankruptcy myths floating around that make people fear the worst, and this is understandable but fortunately, most of the fears that people have are entirely subjective. By far the majority of people who file for bankruptcy do not get into the situation because they're reckless over spenders or because they can't control their addiction to credit cards. Instead, most bankruptcy filers file bankruptcy due to reasons completely beyond their control.

What types of circumstances lead to bankruptcy? Are there more ways than one? For starters, let's look at Detroit's unemployment rate. According to the U.S. Bureau of Labor Statistics, as of January of 2013, the city with a large metropolitan area with the lowest unemployment rate was Oklahoma City, with an unemployment rate of just 5.2%. Where did Detroit rank? As of January of 2013, Detroit ranked 48th in the nation with an unemployment rate of 11.3%, and as of January the national average was just 7.9%. While Detroit's unemployment rate is not the only reason for consumer bankruptcy filings, the economy certainly has ripple effects that impacts everything from your local coffee shop to your local dry cleaners to your local movie theatre, to your local dance studio that offers children's classes. When people aren't spending as much money because they're out of work, it affects the local economy as a whole.

Other common reasons why people file bankruptcy include accidents and illness, both of which can pull the injured or ill out of the workforce and incur tens of thousands in medical bills. People also file for bankruptcy when their small businesses fail, when they get a divorce, when they are unemployed or when they are trapped in an underwater mortgage.

Bankruptcy is not necessarily a bad thing and for many debtors it can offer them the fresh start they truly need. There is no question that people experience a significant amount of stress when they have financial problems, and money troubles can lead to irritability, insomnia, depression, and it can place undue stress on family relationships. Perhaps the greatest mistake that debtors make is waiting too long to file. They give it their best shot and they make every attempt to pay off the debt, sometimes they even go so far as to get a second mortgage on their home or borrow money from relatives. The problem is, these are only Band-Aids, and they are not permanent solutions.

Bankruptcy isn't something that anyone plans to fall into, but it's important for people to realize that the mental perceptions about bankruptcy are false. A debtor can feel isolated, and as if they are the only one filing for bankruptcy, but this is far from the truth. According to the United States Courts, the number of business and non-business bankruptcy filings totaled 1,261, 140 for the twelve month period ending September 30, 2012. Of those, 1,219,132 were non-business filings, otherwise consumer bankruptcies. When one is worried about filing for bankruptcy, they can take comfort in the national statistics and the fact that they are far from alone. Filing for bankruptcy can give the debtor the breathing room they need to make a financial fresh start, and instead of looking at bankruptcy as indicative of failure, they should see it as a learning tool and as a path to a new chapter in their life.

Is bankruptcy on the horizon?

There are some obvious warning signs that a debtor is in trouble. No matter what, when there is more money going out than is coming in, there is going to be an imbalance. When the deficit is large enough, it's only a matter of time before things take a turn for the worse. Sometimes the process can be slow, or in the cases of unemployment or an injury or illness that leaves one out of work, things can go south very quickly. The effects of not having enough money can take their toll on people, money troubles can affect a person physically and emotionally, and it can ruin marriages and tear families apart. The following are some common warning signs that it may be time to consider filing for bankruptcy:

  • You're using credit cards to buy essentials such as groceries or gasoline.
  • You're only paying the minimum payments on your credit cards.
  • You have to give up luxuries such as cable or internet.
  • Your utilities are being shut off.
  • You're late on your rent or mortgage.
  • You have to borrow money to pay your bills.

These types of problems are only the beginning, some people are in far worse shape and have already been evicted or foreclosed upon, or they stopped paying on their credit cards altogether and many of them have been charged off.

If you are contemplating filing for Chapter 7 or Chapter 13 bankruptcy, it's a very good idea to speak with a Detroit bankruptcy attorney from the Law Offices of Marshall D. Schultz sooner than later. If you are worried about what your friends or family thinks about the situation, or if you're worried about your credit being permanently destroyed, please understand that these are misguided fears that only build anxiety and worry. While some family members may disapprove, their opinions aren't relevant when bankruptcy is the most viable solution. While bankruptcy remains on your credit for 10 years, by sticking to a budget and rebuilding your credit, one can rebuild their credit long before the bankruptcy falls off their credit report, and this is VERY encouraging. At our firm, our attorneys have more than 33 years of collective experience and we have handled more than 10,000 bankruptcy filings. We are here to help you decide if bankruptcy is right for you, so please, give us a call today!

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