Signposts on the Road to Bankruptcy

If bankruptcy was a physical illness, we would be able to feel its symptoms and know that something was wrong.  However, many people come to bankruptcy in a state of surprise – or denial – about how they got there, even if it was through no fault of their own. 

In 2018, more than 755,000 Americans filed Chapter 7 or Chapter 13 bankruptcy.  So are there “symptoms” that put you at greater risk for bankruptcy?  Yes, and these include:

Heavy credit card debt – carrying a lot of credit card debt, especially on cards that have high interest rates, can put you in a financial hole quickly and keep you there for years.  Discharging this debt through bankruptcy is one option if you will be unable to pay off this debt.

High medical bills – a health crisis can quickly put you deeply in debt.  In fact, medical bills are the #1 reason people file bankruptcy. 

Aspirational spending – this is just spending more than you can afford so you appear more prosperous – aka, “keeping up with the Joneses.” 

Payday loans – taking out advances on your paycheck by using payday loans is a sure sign you are in major financial trouble.  It has been estimated that fees on a one-week loan can make the interest rate as high as 911 percent. 

In addition, the American Bankruptcy Institute provides a useful consumer bankruptcy checklist and says that if several of these apply to you, you might consider bankruptcy:

  • You have had your paycheck or your bank account garnished;
  • The majority of your debt is unsecured debt — credit card bills, medical bills, etc.;
  • The amount you owe creditors – beyond your house and car payments – is more than you could pay off in five years;
  • You are getting calls from collection agencies;
  • You are have more than one bill that is more than one month past due;
  • You have had lawsuits filed against you by creditors;
  • A large portion of your debt includes medical bills that your insurance does not cover;
  • Your income taxes have not been paid;
  • You do not have many assets;
  • You have no – or very little – savings;
  • You have had a car or other property repossessed;
  • Your home is currently threatened by foreclosure.

If you answered “yes” to three or more of these, you should contact our Nebraska bankruptcy law firm about a free initial consultation.