Every year, thousands of people find themselves in a financial situation that seems insurmountable.
Even as they struggle to pay their bills and keep food on the table and a roof over their head, they feel themselves sinking deeper into debt.
Every year, many of them choose bankruptcy as the best option for getting back on their feet.
In fact, in 2017, more than 760,000 Americans made that decision.
There are many reasons why people get into extreme debt.
Some just spent beyond their limits and used credit cards irresponsibly, but many more lost a job or got a divorce or had a life change that substantially changed their ability to keep up and stay ahead of debt.
Medical bills are a leading cause of debt, even for those with medical insurance.
One study found that more than half of all bankruptcies are caused by overwhelming costs related to medical needs.
While the law has changed many times since then, it is designed as a way for people to organize or eliminate burdensome debt.
Is bankruptcy the right thing to do for you and your family?
Here are four signs that it just might be:
1. You can only make minimum payments and it could take years to pay off your debt
Perhaps when you first got that credit card, you were able to pay all or most of it off every month.
Over time, the balance crept up and so, perhaps, did your interest rate.
After all, that zero percent interest that you were initially offered expired after the first year.
In fact, one study states that the average credit card balance is $5,331, and more than half of us don’t pay our balance in full each month.
Add the interest charges, and you could be paying that off for many years.
If you don’t have the cash to pay $2 or $3 for a cup of coffee and you put it on a credit card, with an average interest rate of more than 15 percent, it could wind up being a $20 or $30 cup of coffee before you know it.
2. You owe money to the IRS
The IRS may be at the head of the list of those to whom you do not want to owe money.
According to a 2018 study by the U.S. General Accountability Office, as many as 21 percent of Americans underwithheld their income taxes.
While the IRS may be willing to work out a repayment plan and may waive penalties, they do not waive interest fees. Depending on how much you owe and for how long you’ve owed it, you could have a tough time with a formidable creditor.
Yes, you may be able to eliminate back IRS and even state taxes through bankruptcy.
Your best bet is to talk to an experienced bankruptcy lawyer as soon as possible.
3. You’re being harassed by creditors
They call, they send you scary-sounding letters, they call again. And again.
Once you are in collections, you may jump every time the phone rings. There are laws that protect you against harassment by debt collectors and there are steps you can take to make sure they stop, but ultimately, if you legally owe the money, the problem won’t go away.
Bankruptcy may be a solution that allows you a fresh start or a way to make payments that are reasonable and realistic—and get collection agencies off your back.
4. You are about to lose your home
While overall, the number of year-over-year foreclosures is down in the New York City area by 4 percent (with the Bronx seeing the greatest decline of 24 percent), it is not much of a comfort if you are facing mortgage problems.
Can bankruptcy stave off foreclosure? The answer is: it depends. Typically, a Chapter 7 bankruptcy cannot prevent foreclosure, but it may buy you some time.
Chapter 13 bankruptcy allows you to create a payment plan to help you catch up on past-due mortgage payments provided you are able to keep up with current payments.
Find out how bankruptcy could help you and your family get back on your feet financially
Bankruptcy attorney Thomas M. Denaro has more than 30 years of experience helping people in and around the Bronx solve their debt problems.
If you think bankruptcy might be the right move for you, please call our office at (718) 863-6000 or contact us online to schedule a free consultation to discuss your situation.