If your debt has become too much to handle and you have found yourself falling behind in the payments for your car, house and credit card bills, you might be wondering if there is any way out of the predicament. You are not alone in such a struggle. You probably have friends, family or neighbors in Lexington who are also struggling with debt.
To get yourself out of the endless cycle of debt, you may have considered looking for extra work or even tapping into your 401(k), or other retirement savings. Unfortunately, cashing out your retirement account is not usually the best way to solve a debt problem. Doing so can cost a significant amount of money in taxes and early withdrawal penalties.
There is another option that you may not have seriously considered yet: bankruptcy. Here are four signs that you should start the bankruptcy process.
The debt collectors are suing
When you default on debt, the next step creditors take is usually to sell the remaining balance of what you owe to a debt collector. If the debt collector is unable to get payments from you, he or she will then file a lawsuit to try to force you to pay the money. Fighting back against such a lawsuit can cost you in court fees and legal fees and you could end up owing even more money that you cannot afford to pay.
Bankruptcy can help you put a stop to any legal proceedings that a collector is trying to enact against you. Once you file the bankruptcy petition, the court will issue an automatic stay that will force the collectors to stop all attempts to collect the debt.
Garnishment of your wages
If a collector wins a case against you in court, they can obtain an order from the court that allows the collector to garnish your wages or even freeze your bank account. With a garnishment order, your employer will have to take additional money out of your paycheck until your debt is paid. Bankruptcy will halt the garnishment.
However, if your wages were subject to garnishment because of back child support or alimony, bankruptcy will not help. The automatic stay only applies to things like credit card debt and bank loans.
You are falling behind on the monthly bills
Another sign that you should consider bankruptcy is if you are having trouble keeping up with your monthly bills. For example, if you are using a credit card to pay your utility bills, phone bills or even to buy groceries because you do not have the funds available to pay in cash, then you will probably have problems keeping up with the minimum payments on the credit card you have been relying on.
Foreclosure is on the horizon
If you fall behind on the mortgage payments for your house, the bank might start preparing to foreclose on your home. Once you file a bankruptcy petition, the bank cannot begin foreclosure proceedings. With the delay on collection that bankruptcy provides, you might have enough time to get caught up on the mortgage payments.
If any of the above applies to your situation, it might be time to consider some real solutions for debt relief. Filing for bankruptcy can help you get your debt under control and reorganize your finances without forcing you to give up your property.