Prices are rising while wages are remaining stagnant. It is no surprise that many Americans are burdened with debt. According to Experian, the average American household debt is $105,056. This is a record high and a 13% increase from 2020.
If you are feeling a financial squeeze, there are some options. You can get a budget together and try to spend less money. You can take on a second job to earn more money. You can get a personal loan. You can try consolidating or negotiating debt.
But if you are, say, tens of thousands of dollars in debt, your best option may be to file for bankruptcy. But it seems as though many Americans do not know when to file for bankruptcy. They keep racking up debt and are only delaying the inevitable.
While consumer bankruptcies are still significantly below pre-pandemic levels, they were up 16% in October from a year ago. No one wants to file for bankruptcy, but those struggling to stay financially afloat should definitely consider the option sooner rather than later.
When a person feels financial pressure, the last thing on their mind is filing for bankruptcy. It takes some time for the idea to sink in. In fact, most people do not file until at least two years after they have incurred financial hardship. Researchers have found that many people struggle with paying their debts for up to five years before seeking help.
People delay bankruptcy for many reasons, such as shame and stigma, but the truth is that waiting too long doesn’t help anything. It is best to consult with a bankruptcy lawyer much earlier in the process.
So, when is the best time to seek bankruptcy help? It is best to consider it before you drain your retirement funds and other assets that would have been shielded from creditors by filing for bankruptcy.
If you are raiding pension or other retirement assets, that is a red flag that you should have sought bankruptcy assistance sooner. Borrowing money to cover current expenses is another warning sign.
It also makes sense to file if a creditor could possibly take away something you need. Filing for bankruptcy could be a good way to keep your car or house or prevent wage garnishment.
Otherwise, you need to address how you could solve the cause of your financial distress before filing for bankruptcy. If you lost your job, file for bankruptcy after you found a new job. If you have a health crisis, file after you’ve gotten better to discharge all of the medical debt.
But keep in mind that bankruptcy only does one thing: it eliminates debt. It does not solve any problems you have, such as unemployment, overspending, divorce, or generally having too little money. Bankruptcy cannot find you a job or give you money.
Contact Us Today
When you are drowning in debt, when do you simply say stop and file for bankruptcy?
Knowing what to do with your finances can be hard. The Law Offices of Adam M. Freiman can make your financial life a bit easier. We have options to help you get out of debt and manage your finances. To schedule a consultation, call (410) 486-3500 or fill out the online form.
