Bankruptcy is designed to provide financial relief to individuals struggling with debt, but it's not the right choice for every situation. To help identify when it's a viable choice, debt lawyers look for certain distinguishing factors. Here's a look at three of the most common. 

How to Tell It's Time to File for Bankruptcy

1. Struggling to Make On-Time Payments

Missing one payment doesn't cause irreversible harm to your financial situation. However, if you're so overwhelmed by debt that you can't keep up, it's a cause for concern.

Regular late payments increase debt instead of reducing it because of interest growth and late fees. They also harm your credit score. In such situations, it's virtually impossible to get on top of the problem again without debt relief or bankruptcy assistance. 

2. Debt Far Exceeds Income & Assets

Debt is only digestible if you can afford to pay it off. Once the total reaches a significant portion of your income and assets, then being able to reduce it in a timely manner is unlikely. Typically, debt lawyers consider owing more than half of what you make in a year significant. Assets, like a paid-off vehicle, also factor into the equation. 

3. Facing Collection Calls or Legal Action

A creditor can take multiple avenues when you're behind on payments. Often, the process begins with a collections agency making repetitive phone calls, followed by seeking legal action. Once it reaches the courts, there is a chance of wage garnishments and repossessions.

These consequences can be devastating, especially when you're already struggling financially. In many cases,  the only way to stop these processes is filing for bankruptcy. For example, filing Chapter 13 bankruptcy puts an automatic halt to any foreclosure proceedings as long as the sale hasn't been finalized.

If you need bankruptcy assistance, reach out to Greg Dunn, Bankruptcy and Debt Relief Attorney. The Honolulu, HI-based debt lawyer has worked with over 12,000 clients across Oahu since starting the firm in 1996. Learn more about his experience online, and book a free initial consultation today by calling (808) 524-4529.