7 Signs That it Might Be Time to Consider Bankruptcy

Written by AskTheLawyers.com™ on behalf of David Shuster with Shuster Law, PLLC.

7 Signs That it Might Be Time to Consider Bankruptcy

Written by AskTheLawyers.com™ on behalf of David Shuster, a Bankruptcy attorney based in Texas.


Filing for bankruptcy can sound like a bad consequence to financial difficulties; however, bankruptcy is intended as a helpful way for people to get out from underneath their debt and rebuild their life, financially and otherwise. Additionally, there are different types of bankruptcy you can file for based on your circumstances. In Chapter 7 or “fresh start” bankruptcies, eligible debt is typically discharged without any requirement to pay it back.

While filing for bankruptcy will affect your credit score for 7 to 10 years, financial experts point out that you can begin rebuilding your credit right away. You may even be approved for a new credit card in as little as three months after filing, and a mortgage loan in four years after filing, even before the bankruptcy has fallen off your credit report. If you are finding yourself harassed by bill collectors, credit card companies, or facing a debt collection lawsuit, it might be time to talk to a bankruptcy attorney about filing.

7 signs that may indicate it’s time to consider bankruptcy include:

  1. It is unlikely you will be able to pay off your debts within the next five years. As a rule of thumb, if it is unlikely that you will be able to pay off your debts within the next five years on your current expected income, you may be eligible to file for bankruptcy.
  2. You pass the means test. The means test is a method of determining who is eligible to file for bankruptcy. To pass the means test, you must be able to prove that your average monthly income for the six months prior to filing for bankruptcy falls below the median income of similar households in your state. However, it’s important to keep in mind that this test is by no means a dealbreaker; even if someone fails the means test, they may still be eligible to file and should reach out to a bankruptcy attorney to assess their situation.
  3. You are facing a debt or credit card collection lawsuit. If you are served with a debt collection lawsuit of any kind this could indicate that bankruptcy might be a good option for you. However, the first thing you should do if you are faced with or threatened with a credit collection lawsuit is to contact an attorney. A bankruptcy attorney may be able to convince the collector to settle for a lower amount while exploring other options for financial recovery with you, including bankruptcy and more.
  4. Bill collectors won’t stop calling. If you are receiving phone calls and letters from credit cards or other collection agencies over unpaid debts, bankruptcy might be a solution to your situation. You can request that they cease contacting you for a period of time, but this does not make the debt go away, and may only lead to an eventual collection lawsuit if you are not able to pay the amount owed. If you’re feeling harassed at every turn by debt collectors, it might be time to file for bankruptcy to make it stop and get back on your feet financially.
  5. You rely on your credit card to pay for necessities. Credit cards can be useful tools for building a credit score; however, a credit card should not be relied upon for the purchase of necessities. In general, unless you already have the money to pay off whatever you put on the credit card, you should ideally not make the purchase. However, people who are struggling financially may have to turn to their credit card as a means of paying for necessities. If this describes your situation, contact a bankruptcy attorney to discuss your options.
  6. You consistently make only minimum payments on your credit cards. A minimum payment is the smallest amount a credit card issuer will let you pay toward your unpaid balance each month. However, this does not address the remaining balance which can quickly pile up. If you constantly struggle to find the money to pay more than the minimum payments on your credit cards, you may be eligible to file for bankruptcy.
  7. You have completed a pre-bankruptcy credit counseling course. To file for bankruptcy, you must first prove that you have completed a pre-bankruptcy credit counseling course in the last 6 months. Not only can these courses help clarify your own situation, but they may also reveal additional methods of recovery including debt consolidation and forgiveness that may or may not involve bankruptcy.

To learn more about bankruptcy and options for your own situation, reach out to an experienced bankruptcy attorney in your area.


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