As we work hard every day at our jobs and businesses to make our ends meet and secure enough money for a good life as we grow older, no one ever thinks they will come to the point of filing bankruptcy when everything is going well. However, unexpected life turns like a catastrophic illness or loss of employment can affect our ability to handle financial obligations and mounting debts. Those kinds of unprecedented economic times might force you to file bankruptcy even if you've never thought of going down this path your whole life.

Bankruptcy is a progressive process you can avoid if you pay attention to particular red flags and signs that indicate that you are headed towards a financial crisis. Keep reading this article to understand the signs you might be headed towards bankruptcy.

What Do I Need to Know About the Bankruptcy Declaration in California?

If you have come to the point of considering declaring bankruptcy, you must be going through a lot financially. You must have heard of many celebrities declaring bankruptcy, and you know it's about being broke and poor financial management strategies. Well, being bankrupt involves money, but it doesn't necessarily mean a person has poor financial management skills, or he/she is a deadbeat for reaching this point in life.

Unprecedented economic times can force people and businesses to file bankruptcy, especially if they've due debts and their creditors are on their tails. California bankruptcy laws allow individuals facing financial difficulties and can no longer pay their creditors to seek debt relief through bankruptcy. The common forms or types of bankruptcy that can help you find relief from crushing debts are:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also commonly known as liquidation bankruptcy, will give you relief from most debts and bills that are due. However, when you file this form of bankruptcy, you will have to liquidate your assets, including houses and vehicles, so that the money from these assets can cover your debts.

If you have assets that you intend to keep or you don't want to lose, this form of bankruptcy is not advisable because you may lose the property/asset to the creditors. Instead, you should consider filing another form of bankruptcy, like Chapter 13.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also commonly known as reorganization bankruptcy, will eliminate your debts without putting your valuable properties or assets at stake. If you currently have a job with continuous income flow and cannot pay all your debts and bills at once, this form of bankruptcy will work in your favor.

Chapter 13 bankruptcy will allow you to settle your debt without rush through a repayment plan that you have to agree with your creditor. If you choose to file Chapter 13 bankruptcy, all creditors and other people you owe money, including your landlord, will have to halt all debt or rent collection efforts because of the bankruptcy's "automatic stay" court order.

If you are in an unstable financial situation and there is no other relief you can seek to get out of that situation, filing a bankruptcy petition might be a good idea for a fresh and manageable financial life. Before you decide to file bankruptcy forms, you will notice some red flags along the way, warning you of your financial situation and the likelihood of bankruptcy declaration.

Signs You Are Headed Towards Bankruptcy

It isn't obvious if you are experiencing financial problems that bankruptcy declaration is inevitable. A series of economic challenges can happen all at once, leaving you with no other option other than filing bankruptcy to regain control of your financial life. Recognizing the following red flags/signs indicating you are headed towards bankruptcy can make a big difference in which form of bankruptcy you should file for a fresh start:

  1. Consistent Phone Calls or Texts from Your Creditors

If you notice you are becoming anxious every time your phone rings from an unknown number, it's pretty obvious you already know who is calling and what they want from you. If you don't settle your debts on time, they can accumulate and become overwhelming to pay all at once. When you come to this point, you should often expect calls, texts, and even lawsuit notices from your creditor threatening you to settle the debt.

Creditors don’t care about the financial problems you are experiencing when the debt is due. Therefore, you should expect them on your tail every day, threatening you with imprisonment if you fail to settle their debt within a particular period they propose. However, you don't have to play on your creditor's terms and conditions even if you owe them, and the debt is due. Legal bankruptcy declaration will put on halt all their debt collection strategies and efforts until you regain control of your financial life.

  1. You Have No Savings in Your Account

We work hard and smart daily to ensure we have enough money on our savings/retirement account to cater to our financial needs in the future when our bodies do not allow us to work anymore. Suppose you notice that you are not depositing any money in your savings account for your retirement, emergencies, or maybe a vacation. In that case, it is a clear signal you are heading towards a financial meltdown.

If you already have monthly income and realize you've no savings in your account, you should watch out for your spending and manage your money wisely. However, sometimes as much as you want to save some money for your retirement, other essential bills and debts can make it hard for you to save even a penny.

If you find yourself in this kind of situation, it might be time for you to consult with a bankruptcy attorney within your location to know which form of bankruptcy will work out in your favor. Debts and other bills shouldn't swallow all your hard-earned money until you compromise the wellness of your retirement life. Contact a bankruptcy attorney to know how you can regain control of your financial life through bankruptcy declaration.

  1. You Have to Use Credit Card to Pay for Most of your Bills and Expenses

Every American can access a credit card easily without a hassle. However, it can pose a significant financial problem if you don't carefully manage your expenses and spending because every payment on your credit card adds up more debt on debt. Before you buy or pay anything using a credit card, it is wise to ask yourself this important question "can I pay for these items using cash, and are they necessary?"

Before you enjoy paying your bills and expenses using a credit card, it is wise to consider other payment alternatives like cash. If you're using a credit card to keep up with your cost of living, it will eventually reach a limit, and you will find yourself accumulating more debts to cover your essential bills and expenses.

The need to use a credit card to pay for most bills and expenses indicates that your financial life is unhealthy. Every day bills and debts can become overwhelming to handle, but you have the option of eliminating all of them through bankruptcy declaration. Once you declare bankruptcy, the court will discharge all your debts until you regain control of your financial life.

  1. Your Monthly Income Cannot Lower or Settle Your Debts

If your monthly budget from your income cannot allow you to pay debts even partially, that is not a good sign because you might accumulate more debts to meet your financial obligations. When that happens, you might have to declare yourself bankrupt to eliminate those debts and avoid creditors' harassment as you plan your financial life.

If you have a regular monthly income flow, your bankruptcy attorney would advise seeking debt relief through Chapter 13 bankruptcy. Chapter 13 bankruptcy will allow you to use your monthly income wisely without worrying about debt collection efforts and threats from your creditors. However, you will be making partial payment as per the agreed repayment plan without compromising other essential responsibilities or bills.

  1. Catastrophic Injuries or Illness

Accidents are unexpected, and when they happen, we ought to be prepared by seeking insurance coverage and saving as much money as we can. When you or your family member suffer catastrophic injuries after an accident, you may have to tap some money from your savings account for the best healthcare services.

If you are lucky to have insurance coverage to pay some of those bills, your financial damage will not be severe, although your savings will also be at stake because you might have to cover other bills that arise.

Catastrophic illness or injuries are things we need to be ready for because they can happen anytime by putting some money aside for emergencies. However, if you don't have any money in your savings account or it's not enough to cover these medical bills, you might have to use your credit card to cover these medical bills, which is a clear sign you're headed toward bankruptcy.

  1. Losing Sight of Regular Payment

Your house and car are essential investments you shouldn't afford to lose by misusing your income. If you realize you are losing sight of your regular payment responsibilities like a mortgage or car loan. It would be best if you were more careful with your spending because soon you might be facing repossession or foreclosure threats. Foreclosure threats are signs that your financial status is crushing, and the sooner your act, the better before you hit rock bottom.

Suppose no other form of financial relief successfully keeps you current with your mortgage and car loan payment. In that case, you should consider filing for bankruptcy to avoid foreclosure threats, which is shameful. Filing bankruptcy will buy you enough time to check your spending and keep your rent arrears current without harassing phone calls from creditors.

  1. You Can't Pay for Your Necessities

A warning sign that you're on the bankruptcy road that you should never ignore is a lack of financial capability to afford the things you used to love or afford, like clothing, jewelry, or even food. When you notice you are not buying these things often as you used to, you should try to figure out the cause of your lifestyle change because something is wrong financially.

These kinds of warning signs are straightforward, although some people tend to assume until it's too late, only to realize they have no other option other than filing bankruptcy to make their ends meet, which is an excellent idea. If you come to this point, you need to research the bankruptcy attorney carefully before hiring them to ensure you have the best attorney by your side for legal assistance on the process of filing bankruptcy in California.

  1. Robbing Peter to Pay Paul

To "rob Peter to pay Paul" is a phrase used to mean to take something from one person and give it to another. If you find yourself borrowing money from other creditors to cover your debts and due bills, it is a red flag that you are going into a severe cash flow problem. It's not uncommon to see people borrowing money to settle their due debts, which is a risky behavior towards your financial freedom because it makes you stuck in debts.

When it comes to collecting debts, creditors will not try to reason with you or be lenient. You will even be surprised by lawsuit notices for failing to settle your debts. If that happens, you must think of other alternatives you can seek debt relief, for example, bankruptcy declaration.

  1. You Don't Qualify for New Credit Any More

If your overall debt load is too high, you will have trouble getting new credit because creditors perceive you as a significant risk to their money. When you become current on all your essential payments like the mortgage and still can't qualify for new credit, it is because lenders cannot trust you to repay their money on time. Filing bankruptcy can buy you time to settle your underlying debts without rush, and afterward, you can repair your credit history to qualify for new credits.

  1. Frequent Financial Emergencies

Frequent financial emergencies indicate that your financial status is unhealthy. If you had a prior financial emergency and face another within a short period, you should admit you have financial difficulties, and that is normal. Research shows that an average American who has less than $1,000 in his/her savings account is more likely to face a financial emergency, especially if there is a loss of income source due to factors like company lay off.

An important part of keeping your savings account secure is to develop an emergency fund to handle any emergency that might come your way. Experiencing frequent financial emergencies is a red flag that you are on your road to bankruptcy, and you need an attorney for legal guidance on the way forward.

  1. Co-Signing on a Loan

If your friend or a relative applies for a loan and requests you sign as a guarantor, you should sign those papers only if you can handle the loan burden if he/she fails to pay. Otherwise, co-signing a loan for a friend might put you in an overwhelming debt burden even if you didn't spend a penny of the money because the creditors will expect you to settle the loan if your friend fails. When that happens, a bankruptcy declaration will not seem fictional anymore.

  1. Sleep Disorder/Anxiety

Before the need for bankruptcy declaration kicks in, you will have sleepless nights thinking and worrying about your financial status. Let's agree that everything good in life has a price on it, and you need money to afford it. Lack of money can cause anxiety and lack of sleep because of the shame that comes with being unable to afford your bills, including your children's school fees and rent as an employed individual.

Unexpected factors like medical bills and job loss can make you crash financially to the extent of experiencing sleep disorder and anxiety, especially if you live paycheck to paycheck. Even the calmest and collected individuals can experience anxiety and sleep disorders if their finances take unexpected turns. In that kind of situation, it would not be a bad idea to declare yourself bankrupt to eliminate some bills and payments for a while before you regain control of your financial health.

Find a San Diego Bankruptcy Attorney Near Me

If you notice the above signs, you are headed towards bankruptcy, and it might be time for you to consider seeking legal help from an attorney who is aware of the California Bankruptcy Code. If you want to negotiate the bankruptcy process smoothly, you will need the expert services of the San Diego Bankruptcy Attorney in your corner. For legal representation to achieve financial relief, contact us today. Call us at 619-488-6168 to schedule a free consultation with us.