Declaring Bankruptcy: When You Should Do It

Do you have an excessive amount of debt that you’re having difficulty paying off? You might be wondering whether or not filing for bankruptcy is the right thing to do. There are various reasons why it might be worth it to take the plunge and file for bankruptcy, either Chapter 7 or Chapter 13, in Utah. Here are some signs that this is the best decision to make in your situation:

You’re working two or more jobs

If taking on a second job or two can help you diminish your debt and pay your bills, that’s great. However, if your debt is so large that even a couple of extra hours of work isn’t helping to shave off the amount you owe, you most likely need to resort to more extreme measures.

Your liabilities far exceed your assets

If you truly cannot pay your debt, and if your debt far exceeds your monthly income, it makes sense to file for bankruptcy.

You’ve tried to negotiate

This may be your only option if you’ve attempted to settle a repayment plan with your creditors to no avail. There’s nothing much you can do if they won’t agree to a repayment plan over time, want full payment, and you don’t have the means to make the payment.

You’re charging daily necessities onto your credit cards

Constantly charging your credit card with gas or grocery bills because you have no on-hand cash is a sign that you’re way in over your head when it comes to debt. You’re most likely doing this because your entire paycheck is going to debt repayments. This is especially unhealthy in the long run since your total debt will rise thanks to the interest you need to pay on your credit card.

You want to keep your Individual Retirement Account (IRA)

Federal bankruptcy law protects your individual retirement accounts from creditors. This allows you to keep your IRA even when you file for bankruptcy and avoid liquidation. If you’re even considering taking out your retirement funds, think again — you’ll be robbing your future self of funds as well as creating a large tax bill on top of your debt. It might be better to file for bankruptcy.

You’re paying off one credit card using another

Paying one credit card off by using a cash advance or transferring the balance to another card won’t make your debt disappear. You can do it once, but if you’re resorting to this tactic often, then you’ll only accumulate more debt.

You’re missing payments and your interests rates are going up

pile of coins showing interest rates

Once you’ve missed a payment or two, many lenders will increase your interest rate by up to 30% or more. If you can’t even get yourself out of debt at a reasonable interest rate, it gets even worse with an obscenely high-interest rate like that. At that point, your monthly payment will go towards interest rather than the principal.

As with anything, there are benefits and drawbacks to this decision too. It’s important to really assess your situation and weigh your options. If any of the following circumstances apply to you, then filing for bankruptcy makes sense and can be beneficial for you.

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