With the COVID-19 pandemic having caused an economic downturn, cases of bankruptcy in Santa Ana are expected to rise. As an individual or business facing insolvency, you should not wait too long before declaring bankruptcy for debt relief and a clean shot to life. First, you must evaluate your restructuring options because creditors might be willing to settle the matter.
People with insolvency wait for too long before seeking advice from an experienced attorney because bankruptcy is an expensive process. So, it’s essential to know the warning signs of bankruptcy so that it can prompt you to consult a legal expert when you intend to wait for long before obtaining legal help.
At the Los Angeles Bankruptcy Attorney, we have highlighted signs you are headed towards financial stress in this article so that if you find yourself in the same financial situation, you can seek advice on declaring bankruptcy.
Signs or Indicators of Financial Stress
While it’s not easy to predict the direction the economy will take post the pandemic, bankruptcy levels will increase if the current trends are anything to go by. Businesses and individuals must be careful of the warning signs that they are headed towards bankruptcy. The following are some of the warning signs that should trigger bankruptcy:
You Have Exhausted Your Home-equity Option
If you pay off your unsecured debts with a mortgage loan of your secured home, it is an indicator you are headed towards financial stress. You can only exhaust your mortgage loan to pay unsecured credit if you can sustain the mortgage loan payments. If you can’t clear the debt after you have finished your mortgage, you are in an even worse situation. Speak to a Santa Ana bankruptcy attorney for legal advice.
Instead of paying off the debt by mortgaging your secured property, an attorney will walk you through the various bankruptcy options in Orange County. Chapter 13 is the way to go because, in this case, because you own property. The form of bankruptcy allows you to retain your property and discharge part of your credits. When you opt for this restructuring option, you will develop a repayment plan to ensure you pay what you owe. However, the repayment proposal must obtain the judge’s approval before implementation.
You Have Zero Savings
Having a cushion for unexpected issues is essential. If you live paycheck by paycheck without saving any money for retirement, travel, life enjoyment, or emergencies because you are paying debt, then you are headed towards insolvency. Living on a paycheck by paycheck means that if your income decreases or expenses increase, you will be pushed against the wall. Luckily, you can alleviate the situation by utilizing debt programs offered under bankruptcy.
Bankruptcy allows you to consolidate your credit and discharge some of it at the end of the legal procedure, enabling you to save and enjoy life. Some individuals are afraid of bankruptcy even when all insolvency warning signs are apparent because of the fear of property loss. However, with the proper legal guidance, you can opt for debt restructuring. Your high and consistent income is used to pay creditors at lower installments, allowing you to save for various reasons.
Inability to Meet Debt Obligation and Lease Payments
The primary warning sign of bankruptcy is missing monthly vehicle or home payments. If you can’t meet your credit obligations when due, it’s an indication that you can’t manage your debt. It’s more worrying when you can’t meet obligations for mortgage and car loans. A roof over your head and a car are essential elements of survival in Santa Ana. You should do your best to protect your home and vehicle through bankruptcy. The same case with credit card debts, if you can’t handle even the least monthly payments, you are headed towards bankruptcy.
You Receive Consistent Phone Calls From Creditors and Collection Agencies
When you demonstrate the inability to meet debt obligations after your monthly payments one to three months past due, the creditor will transfer the debt to the collection agencies. They might also notify you that a past due account has been reported to the credit report, charged-off, or put into a collection.
A charged-off account also means you could face a lawsuit soon, which will result in garnishment or foreclosure if upheld. Collection agencies will begin to reach out via phone, physical address, or mail to save your account or avoid lawsuits.
Phone calls, mail, and email from collection agencies are red flags that you are headed for bankruptcy. You will find better credit relief through bankruptcy and explore more pocket-friendly options of repaying debt.
You’re Ineligible for a Consolidation Loan or Debt Management Program
Some credit consumers seek financial relief through consolidation loans or credit counseling programs. These debt management options by creditors lower monthly installments, and sometimes part of the debt might be discharged.
Debt management programs are offered by credit counseling companies approved by the state to provide the services. These companies prioritize your bills and make payments to creditors in a timely and orderly fashion. Sometimes the company may even contact the creditor for a debt discharge.
You need an income or property to qualify for consolidation loans or credit counseling. If you lack these requirements, you can’t enroll in any programs, meaning your only option is bankruptcy. Therefore, if you don’t qualify for a consolidation loan or debt management program, you should call a Santa Ana bankruptcy attorney to discuss your choices.
Maxed Out Credit Cards
Sometimes financial distress can force you to live on your credit cards. Remember, credit cards have a cap or maximum allowable balance. When maintaining your cost of living with a credit card, you will hit this maximum or even surpass it. You will hit the wall when you cannot increase the limit further or are denied access to other types of loans. So, when relying on credit cards to handle your cost of living, it is a sign you are headed towards bankruptcy.
By declaring bankruptcy, creditors won’t pursue any payment when the court discharges your debt. They might attempt to settle the issue by providing you with other debt repayment options that can help you regain your footing. When out of options for managing your debts, you should consult a Santa Ana bankruptcy attorney to begin the process.
You Have Turned to High-Interest Loans
It’s already bad enough if you live off your credit cards or pay off unsecured debts using home equity. What is more worrisome is turning to payday loans, vehicle title loans, or instant loans. These loans have outrageous interest rates of even 180 percent and can put you in a cycle of debts where you secure a new loan to finance the existing one.
Avoid exorbitant interest rate loans by reading the fine prints in loans to ensure annual interest rates don’t surpass 25 percent. Alternatively, you can pursue a consolidation loan whose interest rates are reasonable than payday loans. If it’s not possible, then bankruptcy is your only escape route. Instead of opting for high-cost loans, turn to bankruptcy for a financial reprieve.
Your Current Monthly Income Can’t Lower the Debt
If you can’t reduce the amount you owe to creditors through your monthly income, it’s a sign you are headed towards bankruptcy. Your monthly earnings should be enough to pay your bills, including creditors, and save for retirement or enjoyment.
However, if paying your bills, debts included means ignoring other living costs, you should look for alternatives of restructuring and managing debt. These options include debt consolidation, acquiring an extra job, or developing a monthly budget.
If you have depleted these options, and none is working, bankruptcy is the way to go. Your renewable income will be used to repay creditors through a plan, allowing you to retain your property under Chapter 13. A clean slate brought about by bankruptcy will enable you to put your finances in order and regain your life.
You Have Been Involved an Accident or Lost a Job Hindering You From Retaining a Consistent Income
Most Californians are hardworking and able to maintain a job that pays their bills, including debts. However, what happens when you lose your job or suffer an accident that prevents you from working? You will lose your renewable income, which means you will no longer be able to honor your debt obligations. If this applies in your case, it’s an indication you need to declare bankruptcy.
You Set Aside Crucial Bills to Settle Secured as Well as Unsecured Credit
As an individual or business, you should have adequate money to cover your living cost, pay bills, and other essentials. Suppose you realize you are cutting essential living costs like not having health insurance coverage or performing regular car repairs. In that case, it’s an indication you are in financial distress and need to declare bankruptcy.
A monthly budget should pay off your bills by establishing where more money is effectively used. You can reduce unnecessary rent, gas, water, energy, or food bills to save money. However, when you scale down on debt repayment bills and lease payments, you could end up accumulating excess debts and other damages, which is a warning sign of bankruptcy.
Before declaring bankruptcy, talk to your Santa Ana bankruptcy attorney for legal advice. Attorneys believe it’s not right to set aside critical bills to pay credit. Instead of being stuck in debt, your attorney can have specific debts discharged to repay debt and maintain everyday life, independent of your financial standing.
If you experience any of the above situations, it’s an indication you are headed towards bankruptcy. Therefore, you need to consult with a Santa Ana bankruptcy attorney to explain the different bankruptcy types as per the bankruptcy code.
Choosing a Bankruptcy Option
Once you have noticed warning signs of financial difficulties, you should reach out to your Santa Ana bankruptcy attorney right away. A legal professional will explain the various forms of bankruptcy and how to choose the correct option.
You can find debt relief from a financial problem if you have minimal exempt property by filing Chapter 7 bankruptcy, otherwise called liquidation. The procedure involves an orderly court appointing a trustee who takes over your assets, sells them off, and distributes the cash among creditors. However, assets like clothing, automobile, or home furniture cannot be sold to repay debt.
Similarly, wage earners can file Chapter 13, where you work with the court and your attorney to propose a plan to pay creditors and collection agencies gradually. The chapter enables you to retain your property, and during the stay, creditors are barred from pursuing debt collection activities. The monthly payments you make in the proposal depends on your financial earnings and the amount of outstanding debt.
If your business or commercial enterprise is struggling to stay afloat, file bankruptcy under Chapter 11. It will help you continue with business operations as you pay your debts concurrently through a court-approved repayment plan. Besides, individuals ineligible for debt relief under Chapter 13 can opt for Chapter 11. However, you must have multiple non-exempt properties.
For fishers or farmers who want to clear debt over a particular period while running their ventures, Chapter 12 is the best choice. The bankruptcy form is very similar to Chapter 13. The only difference is that it’s geared towards people who have accumulated debt from a family farm.
If you experience bankruptcy warning signs, starting the procedure might be the only or the best way out of the economic downturn. You can have some debts discharged under Chapter 7 or pay back the credit via a payment plan if you have a high and renewable income. The procedure also ends with a debt discharge, which means your debt will reduce significantly.
Talk to a Bankruptcy Attorney Near Me
Everyone faces a unique financial situation that affects bankruptcy outcomes. Therefore, if you experience warning signs of bankruptcy, consult with an experienced attorney to discuss your situation. To have a professional review your case and advice on the best choice of bankruptcy, call the Los Angeles Bankruptcy Attorney at 424-285-5525. Our attorneys are ready to explain the process and represent you in bankruptcy court.