Have you ever found yourself in a scary situation where you realized your debt was growing larger while your pool of income appeared to be shrinking? Maybe the next thing you know you started getting more and more collection calls, being threatened with lawsuits, wage garnishment, asset seizure or even a lien on your home. The next thing you know, you’re already looking at your options and fearing that the only thing you can do now is file for bankruptcy. But you also realize that by doing that, it usually won’t mean the elimination of all debt and you now have a huge blemish on your credit record. You don’t have to go down that road, but even if you are pretty far down it you can still find ways to get out.

A Big Reason Bankruptcy Happens

You might think bankruptcy happens only to those who spend and spend and want all that fancy jewelry, nice cars and vacations to Bora Bora. But it can happen even to those who think their financial situation is pretty good. Living above your means is usually the most common way we hear about heading to bankruptcy, but the real reason is that there was no plan for when an emergency situation came up and you needed a little bit of cash reserves to get by. Maybe you didn’t make the investment either that you should have made in a home warranty plan, an auto repair warranty, a good family health insurance plan or an emergency investment fund in either another savings account or a 401k plan. Not having certain warranties or insurance coverages means you could be footing home, auto or medical expenses yourself. It’s usually when you have to make those very painful unexpected payments that you find yourself falling behind on regular bills and then heading deeper into debt.

Identify Warning Signs That Bankruptcy Is Coming

There’s some pretty clear signs that bankruptcy is heading your way and you need to start looking to stop the damage before it’s too late. If your credit cards are maxed out, you don’t qualify for a debt counseling or management program, you’ve had to use payday or car title loans to meet basic expenses, and a home equity loan is completely off the table, that usually means bankruptcy is pretty imminent. But you can also catch it even earlier by realizing that if your savings or checking accounts are getting low and you are already looking at credit cards to cover what you don’t have, it’s time to stop everything and get help.

Ways To Get Out Of Debt And Recover From Near Bankruptcy

The road to coming back from the financial hole without filing for bankruptcy can be pretty hard and require sacrifices, but you don’t want to keep doing the things you’re currently doing because the consequences will be dire. Dave Ramsey, who’s an expert in business and debt was in bankruptcy once himself, but he realized it wasn’t the end of the world and he could get out by making a few changes.. As he suggests, avoiding bankruptcy and getting out of debt may mean selling off your nice car, television, pool table and cutting off cable TV, Netflix, and taking on another job even. But in the end it is completely necessary to get back up on your feet.

At the end of the day, preparing and understanding how close you really could be to bankruptcy is truly the only way to avoid it. On some cases, it may be that you’ve fallen too deep in debt that there truly is no other way out other than filing for bankruptcy. But as even the best bankruptcy attorney will tell you, never do that unless you can say for certain that it truly is the only way out.

 

by: Sia Hasan