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When should one file for bankruptcy?

As the economy picks itself up, many people across the country are also trying to get their finances in order. Across Arizona, the rate of bankruptcies filed is decreasing, a trend that can be seen in Phoenix where bankruptcies fell more than 50 percent in the beginning of 2014 compared to the same period in 2013.

However, many people are still struggling with debt and trying to keep their head above the water. The real problem may be that some Arizona residents may not be aware that they are in financial stress until it is too late. There are some signs, however, that can alert them to potential financial problems and help them get a grip on their situation sooner rather than later.

Perhaps the most basic warning sign is missing payments. Missing a mortgage or auto loan payment is especially troublesome and could be a big warning sign about financial problems. This usually leads to phone calls from debt collection agencies, who start making the phone calls 30 to 90 days after a bill has become due.

Maxing out credit cards is another obvious sign, but exhausting home equity options is one many Arizona residents don't think of. Many people use their home equity loan to pay off higher interest bills, such as credit card debt, but some fall short in paying off high interest debt even this despite exhausting this option.

In addition to this, when Arizona residents find themselves turning to high cost loans and cannot qualify for debt management, it may be time to accept the reality that they are getting overwhelmed with debt. However, things are not as bleak as they may seem, as they may be able to benefit from the federal protection offered by filing for bankruptcy. Personal bankruptcy, whether one qualifies for Chapter 7 or 13, can not only wipe out most bills but also grant the filer a fresh start on their financial life. To learn more about these options, it may help to speak with a legal professional.

Source: The Arizona Republic, "7 warning signs you're heading towards bankruptcy," Russ Wiles, Aug. 4, 2014

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