Setting My Finances Straight

The average American adult has $7,978 in unsecured personal loans (loans that don't require collateral). Loans support people when they want to make large purchases or they run into unexpected emergency expenses. At a certain point, the loans become more of a hassle than a help. With nowhere else to go, some households may consider filing for personal bankruptcy, but most people resist unless absolutely necessary. Open your books and look for these signs that you should consult with a bankruptcy attorney. 

1. Delinquent Accounts

Most households receive bills on a fairly regular schedule every month. Ideally, the incoming funds can keep up with the bills as they come (including regular deposits into a savings account). When things get tight, the bank account may not have enough funds by the due dates. Often, the late fees only exacerbate the late bills to the point that creditors and utility companies send you threatening letters.  

2. Increased Credit Card Activity 

When a family gets behind on bills, credit cards offer temporary relief from late payment reminders. Credit cards often have high-interest rates, especially if the owner has bad credit. These credit cards add to the monthly bills. With more bills to pay, the household will need to adjust its budget, make more income, or fall even further behind in debt. 

3. Your Debt Exceeds Your Income

At a certain point, you need to sit down and examine your finances to determine how much money is coming in every month and how much money is owed every month. Many households discover that their income doesn't cover the bills. In some cases, unemployment or illness may mean limited or no income. Chapter 7 bankruptcy is a relatively quick process that gives these clients a new start when they receive income again. Other households hold steady jobs, but the income isn't enough. Chapter 11 bankruptcy allows clients to keep their home but restructures the debt into a reasonable monthly payment. 

4. Your Debt Qualifies Under Bankruptcy 

Bankruptcy aims to eliminate debt through a thorough examination of a household's finances and then liquidating the client's assets or restructuring debt payments. Not all debts qualify for bankruptcy, though. Credit card debt and delinquent accounts often become eliminated. However, certain debts won't be eliminated, including:

• student loans
• taxes
• child support 
• alimony

When you schedule an appointment with an attorney, prepare by writing down all monthly bills and all debtors along with the amount owed to help the lawyer determine if bankruptcy is right for you. 

For more information, contact a tax lawyer near you.