Sunday, May 10, 2009

5 Signs That It May Be Time to File Bankruptcy

Bankruptcy is intended to help honest debtors get a fresh start, but there is no hard and fast rule on who will benefit the most from filing for bankruptcy. These are some of the warning signs that I look for when advising a potential client that it may time to file for bankruptcy:

1. Struggling to make rent or mortgage payments. When someone is faced with mounting bills, some debtors will play a game I call the Credit Card Shuffle, randomly choosing which minimum payment to make based on how nasty the collection call will be. Some debtors will even pay credit card bills before paying their rent or mortgage rather than face those harassing collection calls. This is simply wrong. Food and shelter should take priority over credit card debt.

2. Stress. Are you losing sleeping or constantly arguing with your spouse because of your debt problems? Money problems are a leading cause of divorce. Bankruptcy is not a cure all, but it can help remove your financial problems as a source of difficulties and stress in your marriage.

3. Health. I have seen far too many clients losing sleep and suffer stress-related health problems because of their financial struggles. A willingness to work multiple jobs or crazy overtime hours may be a sign a good character, but it can lead to burnout, exhaustion and anxiety.

4. Changes in your normal behavior. Are you considering doing something illegal to fix your debt problems or something that could put your health or the health of your family at risk? Have you taken up gambling or drinking? Are you doing things that are “out of character” for you? These may be signs of desperation and it may be time to see an attorney.

5. The Balance Transfer Shuffle. Are you constantly applying for new credit cards to take advantage of low balance transfer rates? This may be a sign that you are in over your head in debt.

If you identify with one of these warning signs, schedule a consultation with a bankruptcy attorney and explore your options. Debtors in Southern California may contact us for a free consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.


Malcolm Ruthven said...

I found the contents of this article in the NACBA listserv and it struck me as so true that I wrote a short blog article about it and linked back to this article. What really got my attention was that four of the five items indicate a lessening of quality of life, and that should serve as a wake-up call. Thanks for publishing it!

Carl Starrett said...

Thank you very much. My wife works with me as a paralegal and is working on a follow up article from her perspective. She brings 10 years of human resources experience with her and is a great help to me.

Jonathan Ginsberg said...

Carl, the points you make in this post really resonate with me. I have been a debtor's attorney for over 20 years and by far, the stress and loss of peace of mind are the reasons why people file bankruptcy. Sales people inherently know this - when they are under stress and "need" to make a sale, the negative energy they give off kills any possible deal. As unpleasant as bankruptcy may be, it can be a better choice than losing one's health and family relationships.