Many Americans live paycheck to paycheck and face financial turbulence with every unexpected expense. While this has become an acceptable norm, individuals often overlook consumer bankruptcy as a way to gain a fresh start toward a more stable financial future. It is crucial that people quickly recognize the signs of financial distress and take steps to avoid disaster.
While every situation is different, there are numerous scenarios that might point to impending financial trouble, including:
- Extensive credit card debt: Many Americans first turn to credit cards when facing serious financial troubles. Whether for a quick cash advance or choosing to pay a utility bill with credit cards rather than from a checking account, over-reliance on credit cards can lead to trouble.
- Juggling credit card debt: While it might be common for individuals to regularly move debt from one card to another to take advantage of a promotional rate or other benefits, doing so out of necessity can end in ruin. For example, paying a credit card bill with another credit card simply moves debt to avoid a late fee. It is not a true debt solution.
- Mounting medical debt: Incurring medical debt is not an uncommon experience. When that debt lingers, however, or is a greater sum than can be managed in a succinct time period, individuals might face challenging financial times.
- Using retirement funds to pay debt: Individuals spend years – even decades – paying into various retirement funds to help them later in life. When individuals choose to incur a huge penalty for early access to these funds, financial peril might be right around the corner.
- Facing legal action: Creditors will often work quickly when their algorithm suggests that a debtor might not have the means to pay. They might seek legal action resulting in wage garnishment or bank account levy to ensure they recover a portion of the debt.
When facing financial peril, an individual might not consider bankruptcy as a viable option. Whether this is due to the perceived failure that bankruptcy represents or the overwhelming desire to find their own solution – or a combination of both – avoiding this option can be disastrous. The common advice is that as soon as bankruptcy becomes a realistic solution, individuals should immediately pursue it.