Sometimes it can be difficult to know when debt can be managed personally and when it should be managed through a bankruptcy filing. Here is a brief look at the signs of bankruptcy and how you can know it is time to file.
Signs of bankruptcy
First, it can help to know a few of the most common signs of looming bankruptcy. If any of the following apply to you, then it may be a good idea to start preparing to file.
- Your credit card balances are about to hit their limits.
- You are making the minimum payment on your credit card bills.
- You are not earning enough to pay down debt.
- Your bank account goes negative between paychecks.
- You are foregoing necessities (such as health insurance) to manage debt.
- You’re borrowing from one creditor to pay another.
- You are receiving calls from debt collectors.
- You are unsure of exactly how much you owe.
- The thought of sorting out your finances intimidates you.
When to file
If two or more of the above apply to you, it could be time to file. In order to know for sure, however, it is best to assess your financial situation.
To gain a firmer grasp of your financial situation, start by determining what all of your liquid assets are. A liquid asset is any asset that can readily be converted to cash. In other words, it can be sold with little impact on its value. Examples of liquid assets you might own are money in a checking or savings account, bonds, shares of stock, mutual funds, and money market funds. Create a rough estimate for your own liquid assets.
Next, gather together your bills and credit statements. Add up the total cost of what you owe. Now, compare that amount with the rough estimate of your liquid assets.
Where do you stand in your financial situation? Remember: Bankruptcy is essentially when you owe more than you can afford to pay. If your liquid assets are higher than what you owe, then you may be able to work with a financial adviser to develop a plan for paying down your debt. If your liquid assets are less than the amount of debt you owe, then now would be a good time to consult with a bankruptcy attorney. An attorney can help you determine what will be most advantageous for you in eliminating debt.