To start, what is bankruptcy? Bankruptcy is a legal process that a debtor has entered into to solve their financial problems. In the United States, bankruptcy has become one of the most popular alternatives for resolving debt issues. Because of this, many consumers and businesses have begun to understand the different characteristics of bankruptcy and the signs associated with it. Still, it’s important to look and understand the signs closely.
Knowing these indicators and how they impact your decision to file for bankruptcy may prove to be very helpful in assisting you in making the best possible financial decision.
Indicators that Bankruptcy Might be Necessary
Inability to Pay Bills
The first and perhaps most obvious of the red flags that may indicate that an individual may be preparing to file for bankruptcy is the inability to pay their bills. Many individuals filing for bankruptcy are actually experiencing financial difficulties related to the credit cards and consumer loans they have made.
Typically, when a consumer’s account falls behind, they try to contact the credit card companies and other lenders to rectify the situation. Some companies will allow you to fix the credit situation, but not all will.
Another indicator of potential bankruptcy in the process is diminishing income level. Whether you may be facing the possibility of a looming financial crisis may be indicated by funds in the household decreasing. Typically, this is due to job loss.
Once a consumer’s income has dropped, they may begin to look at their various assets and begin to liquidate some of them to raise money to prevent a large-scale financial loss.
While this strategy may work in some cases, it is important to keep in mind that it will simply result in a loss of thousands of dollars worth of assets in the majority of cases. While the goal of any individual looking to prevent bankruptcy may be to have enough money to cover their debts, liquidating all of your assets will not help to accomplish this goal. It’s important to be honest with yourself in this situation to know if this applies to you.
There are a wide variety of causes that can lead to bankruptcy. It’s important to talk to a financial expert or bankruptcy lawyer to see what options are available for you.