How Do You Know When it is Time to File Bankruptcy?

by John Skiba
Contact

As I say throughout my website, no one wants to file for bankruptcy. Bankruptcy is usually an absolute last option for people after trying to manage their debts over several months or even years. You keep trying to come up with some payment arrangement with your creditors, holding out hope that your income situation will improve or that the creditors will somehow simply go away. I often meet with clients and then won't hear from them for months, only to have them come back and say that it is finally time to file. So how do you know when it is time to go ahead and file your bankruptcy? Here are a few indicators that it is time to file your bankruptcy case:

#1 - You Wages are About to Be Garnished

Wage garnishment is an indicator to me that your debt problems are pretty advanced. In order for a creditor to garnish your wages or bank accounts they must first have a judgment against you. In order to have a judgment against you the creditor must have sued you in court. Most creditors do not file a lawsuit as a first move. They will call you, send you letters, hire collections agencies, and then only when the debt is very delinquent do they file a lawsuit. If your wages are about to be garnished it is time to deal with your debt problem.

In Arizona 25% of each of your paychecks will be taken in a garnishment. Filing a bankruptcy case will immediately stop any future garnishment and will allow you to deal with a debt problem that has been festering for some time.

#2 - You are Robbing Peter to Pay Paul

If you are paying your credit card debt by using other credit cards, using balance transfers, or failing to pay other bills so that you can make the monthly minimum payment, then it may be time to file bankruptcy. If you are going into debt to pay your debts, you are involved in a difficult cycle that is going to be very difficult to get out of without a serious infusion of income. It is likely that a payment is going to be missed which will result in higher interest and higher monthly minimum payments. Bankruptcy may be the only solution to ending this cycle.

#3 - The Interest Rates on Your Creditors Cards are Above 20%

With most credit cards if you are late on a single payment they can dramatically increase your interest rate, often up to $25% to 30%. If you have several cards that have interest rates above 20% it may be time to consider bankruptcy. The new Truth in Lending laws require that your credit card company disclose to you on your monthly statement how long it will take you to pay off your debt if you only make the monthly payment. There are also many calculators online that can give you this information. It is staggering to run these calculations on even relatively small debts that have a high interest rate. For instance, if you have a credit card with an $8,000 balance and you have a 22.99% interest rate, if you pay only the minimum monthly payment it will take you 220 years to pay off this debt. You will also pay $161,676 in interest payments during these two centuries (yes, I did just say TWO CENTURIES!).

When you run the numbers it is easy to see that you may be in a situation that you will not be able to get out of. And the reality is, I never see people who only have one $8,000 credit card debt. Most people I see have $20,000 up to $150,000 in credit card debt. At that point, bankruptcy may really be the only option to solving your debt problem.

There are many other reasons or indicators that it is time to file for bankruptcy: lawsuits, large medical bills, etc. I have found that simply gaining the knowledge of what your options are and how you can tackle your debt through bankruptcy can bring a lot of peace to your situation. My bankruptcy consultations are always free. I would be happy to meet with you and discuss your options in helping you to become debt free. I can be reached at (480) 420-4028 or via email at john@skibalaw.com .

Image: Marco Bellucci | Flickr Creative Commons.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© John Skiba, Arizona Consumer Law Group, PLC | Attorney Advertising

Written by:

John Skiba
Contact
more
less

Arizona Consumer Law Group, PLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.