Most individuals declare bankruptcy for common reasons such as sudden unemployment, divorce, substantial medical bills, or excess use of credit cards.
If you go through this situation, you will most likely lose your assets to repay loans. Aside from that, you might develop health issues like severe stress from overthinking.
While going bankrupt is considered harmful, filing for bankruptcy may be your best option. This can help you avoid repossessing properties and completely discharge eligible debts.
5 Warning Signs For Bankruptcy
In addition, you can legally prevent loan collectors from endlessly calling you, allowing you to focus on fixing your finances.
If you suspect that you’re headed for bankruptcy, pay attention to these five warning signs:
#1. You’re Constantly Stressed About Money
Feeling down due to financial worries can affect your self-confidence, sleep quality, and energy levels.
This stressful situation will make you feel embarrassed to hang out with friends, cause arguments with your family members, and develop fear for the future.
As a result, you might begin withdrawing from social activities while experiencing physical symptoms like migraines and stomach pain.
If you’re constantly dealing with financial stress, you might be heading towards bankruptcy. For instance, you have sleepless nights worrying about paying your rental and auto bills.
If you do so, you should learn How To File for Bankruptcy to help you navigate the legal aspects of this process.
Aside from that, you might even receive assistance from a professional therapist so you can find better ways to cope.
#2. You’re Unable To Qualify For Debt Management
Debt management plans can reduce credit card interest rates and minimum payments to creditors.
When you apply for this plan, your debt collectors might agree to freeze charges on your loans and prevent other legal actions such as suing you in court.
In turn, you will have the peace of mind you need to deal with your financial losses because they won’t remind you of your debt settlement daily.
While a debt management plan is beneficial, you must have some funds left each month after paying your essential bills.
You only have to complete a personal budget and debt assessment and present the results to the debt consolidators.
If the outcome is negative, then you will not be able to qualify for this plan, which is a common sign that you’re on your way to bankruptcy.
#3. You Have Maxed Out Credit Cards
Using credit cards responsibly will earn you reward points for groceries or restaurants and high cash back from purchases.
Paying with this card will also help you prevent financial losses from fraud once a thief steals it from you.
As a result, you won’t be charged for the transactions you didn’t make while the financial institution investigates the issue.
While credit cards have many benefits, reaching the maximum balance to pay off your debt and bills can mean you’re close to bankruptcy.
Furthermore, these companies will decline your card, limiting your loan options. Additionally, your interest rates will increase, and you will receive penalties if you sign the contract without carefully reading it.
#4. You’re Missing Payments
Making the habit of paying your bills on time is vital in controlling your financial life. This will save you money by reducing interest rates, eliminating stress, and increasing your credit score.
Aside from that, settling payments early will help you avoid receiving late payment dues in case your check gets lost in the mail. However, you might be headed for bankruptcy if you’re constantly missing payments for current bills and auto and student loans.
For example, you might have recently lost your primary source of income for a week and don’t have enough emergency funds to cover your monthly expenses.
After a few days, your debt collectors will start calling or emailing you about cutting your water or electricity supply to force you to pay.
#5. You’re Receiving Phone Calls From Debt Collectors
Nobody likes getting daily phone calls from debt collectors because this incident can be stressful. However, it’s their job to attempt to reach out to you if they believe you’re past due on your loans.
If you don’t answer their calls, they are legally allowed to contact your family members and friends to collect payments and additional fees for late payments.
If you’re constantly receiving phone calls from your debt collectors, then it’s time to assess the possibility of you going into bankruptcy.
While this incident may be brutal to accept, you should file a claim so that financial institutions can validate your inability to pay on time.
They might reduce your interest rates and increase your grace period to source funds to repay loans.
As an adult, you must continuously assess your financial health to avoid going bankrupt. Therefore, you must check these signs to know if you’re headed for bankruptcy.
Once you do so, you can take the necessary actions to manage your finances and avoid damaging your reputation due to legal cases.