Herb Kohl, a successful business man and a former United States Senator from Wisconsin has rightly said that “bankruptcy is a serious decision that people have to make.”
Many people are weary about bankruptcy as it bears a negative impact on the individual’s credit score. But if you are currently in a situation where your debts are spiraling out of control, you must not delay filing for bankruptcy using Debt Advisors Milwaukee.
Below are a few red flags that are sure shot signs indicating that filing for bankruptcy, is the right course of action.
- Using credit cards to meet everyday requirements
People who utilize their complete pay check to pay off their debts usually find themselves in such a situation. For example you pay $100 as minimum payment towards your debt but require another $100 for your monthly supplies, which you invariably pay using your credit card.
This is a dangerous pattern to follow as in this way you end up paying more due to the steep credit card interest rate.
- Using one credit card to pay the bill for another card
If this is a one-time thing then it may not be a serious red flag. But if you repeatedly withdraw cash or transfer the remaining balance from one card to settle the bill on another card, it will cause your debt to shoot up in a rapid pace.
- Unable to make payments
If you are unable to make payments, then your credit card company will increase the interest rate. Once this happens, most of the money you repay goes towards the interest and not towards clearing the principal amount.
Also, as the interest rate has been hiked, it invariably results in higher monthly payments. This will become a big financial burden on you. Therefore filing for bankruptcy is a viable option that one must consider for getting out of this situation.
While it is commendable that an individual takes on two or three jobs in order to manage their debts, it may not be enough in a few cases. If you are unable to significantly reduce your debt after working 10 extra hours every week, it is an indication that you must consider other alternatives like bankruptcy to manage the debt.
- Lender attempts to garnish your wages
Garnishing wages refers to an arrangement the lenders make with the banks to withdraw your paycheck from the bank account directly. The lenders can garnish an individual’s paycheck if it is 40 times the minimum wages. If the lenders are able to garnish the wages, it will put you in additional financial pressure.
Therefore, if you have received a notification from the lenders who are attempting to garnish your paycheck, filling for bankruptcy can stop them from moving ahead. Although this is only a temporary relief but it does buy you some time.
- Withdrawing money out of retirement fund
Retirement fund is a security blanket for meeting your needs in the future. Withdrawing money from this fund will not only add an element of uncertainty but also result in creating a tax bill that might eventually become another debt you are unable to pay.
As retirement funds are does not come under the cover of bankruptcy, you must not withdraw money from it if you choose to file for bankruptcy.
- Alternative methods of managing debts are not working
If you have tried to negotiate with the lenders to reduce the interest rate, followed a strict budget and worked multiple jobs but still unable to make any significant progress in managing your debt, then filing for bankruptcy may be the only option left to get out of the crisis.
- Debt affecting your quality of life
If your work and personal life are facing the brunt due to your debt situation, filing for bankruptcy will help you get a handle on things and move on so that you can slowly get back to a better quality of life.