In the US, the total bankruptcy filings for the year ending March 31, 2025, reached 529,080. This is a 13.1% increase compared to the previous year, according to the Administrative Office of the U.S. Courts.
Bankruptcy helps people or businesses that cannot afford to pay their debts. It is like a new start when you owe more than you can afford to pay. If you think that bills are piling on top of each other and there is no way out, you must start thinking seriously about bankruptcy.
According to a New Smyrna Beach bankruptcy lawyer, eligibility and exemptions vary depending on the type of bankruptcy and the specific laws of the jurisdiction.
Let’s look at the considerations you need to make before filing for bankruptcy.
Recognizing the Signs of Financial Distress
If you find yourself overwhelmed with bills or just paying minimums, you are definitely experiencing a financial crisis. You may be switching credit cards to pay one off or ignoring creditor calls. Taking cash loans or withdrawing money from your emergency funds can lead to more financial issues when unforeseen expenses come.
When you’re ready to admit that you need help with your debt, that is when you can start moving forward and tackling your financial hardships.
Evaluating Your Debt Situation
Knowing the state of your finances is the start of getting out of a serious debt situation.
Bankruptcy exemption lawyer Christopher M. Kerney says it is possible to enjoy the benefits of bankruptcy – stopping collection calls, working through debt, and eventually rebuilding your credit – without having to give up certain property.
This is why it’s important for you to work with an experienced bankruptcy lawyer who can help preserve your important assets.
When evaluating your debt, you need to compile a comprehensive list of any debts associated with your credit cards, loans, or anything else. List your assets, bank balance balances, interest rates, and payments per month for everything that you owe so you can see the figures pertaining to your obligations.
The next step would be to write down your income and expenses. Are you always spending more than you earn? If yes, start identifying areas to cut down. Give priority to your debts, focusing first on those with higher interest.
Decide what is possible, bearing in mind anything truly possible to repay all your debts within a reasonable time. An honest evaluation of your debt will go a long way in deciding whether or not to consider bankruptcy.
The Impact of Creditor Pressure
How much influence does creditor pressure have on your financial decisions? Pressing situations can cause clouded judgment.
If you get a lot of calls and letters threatening legal action, you can feel that you have to make decisions quickly. When you think about it later, you could realize that those actions included taking money out of savings and borrowing from friends. Prioritizing creditor payments over essential expenses can further strain your finances.
The stress you experience can result in sadness and anxiety, which shows the importance of thinking clearly about your choices. When there is immediate pressure, you might not take the time to work together on a long-term answer.
An individual who is able to handle the pressure well may be able to step back and assess their situation without allowing the demands of their creditors to influence their decision-making.
Understanding Your Options for Relief
What options do you have when confronted with overwhelming debt? Try negotiating with creditors. Most may agree to reduce payments or accept less than the full amount owed.
Debt consolidation is another thing to explore. This process involves combining all debts into a single loan, allowing for just one payment to be made. It may result in paying lower interest rates.
You can look into credit counseling services that offer assistance and counseling in working out a practical repayment plan.
If none of the repayment arrangements work for you, bankruptcy might be your next best alternative. Chapter 7 can get rid of most unsecured debts, whereas Chapter 13 puts up a plan for paying them back over time. Think of these distinctions before making a decision.
Taking the Next Steps Towards Financial Recovery
Each person should have a plan that is unique to their situation to become financially stable.
One component of figuring out your financial situation is making a list of your debts, income, and expenses. This technique can help you see where you’ve been spending money and find out various ways to lessen your spending.
You can try to design a budget to keep your expenses under control. You should not hesitate to get the services of a financial planner. A financial planner is responsible for coming up with plans for your specific financial situation.
Think about engaging in debt consolidation through another channel or speak to your creditors for more comfortable terms of repayment. Monitor how things are going and tap yourself in the back for having small wins everyday. Financial freedom is not impossible if you stay focused on your financial recovery.
