Question 1. Do you need to borrow money to keep up with your bills?
Most people will use credit to get handle an extraordinary expense, like a major car repair. But when you are borrowing money just to make ordinary bill payments, it is like having a thermometer saying that you that you have a dangerous fever. This is telling you that your income is not sufficient to cover your regular living expenses and to keep up with your ordinary installment payments. Something has to change soon. You need to spend less, or earn more. Either way, you know you can't go on borrowing forever.
Question 2. Have you borrowed money from a payday lender?
The loudest way to scream, "help me before I borrow again" is for you to resort to a payday loan. Payday loans are predatory. The interest rates are killer. These loans are are a trap that many people will never climb out of. A typical pay day loan carries an interest rate of almost 400%. This means that over a 12 month time period, you would need $4 just to pay back every $1 that you borrowed. Borrow $1000 and pay back $4000. How stupid can you be? If you are at the point of selling away your next pay check before you even earned it, you might as well start selling your blood.
Question 3. Are you getting phone calls or letters reminding you that you owe money?
Having bill collectors demanding money is like having a financial alarm clock ringing to wake you up. You can turn off a clock, but you can't turn off a determined bill collector. Hanging up on them or ignoring the calls won't fix your problem. They will keep calling you again, and again, and...
Question 4. Are you incurring late charges on credit cards, car loans or any other revolving credit accounts?
The only people who consistantly pay late charges are suckers or people that are at the end of a financial rope. A typical late fee is a 5% penalty. Keep doing that for 12 straight months, and you have paid your lender 60% interest just for the privilege of paying a bill 30 days late, (not to mention destroying your credit even if you do pay it.)
Question 5. Are debt problems stressing your marriage or personal relationships?
Nothing wrecks a fragile personal relationship faster than debt problems. You find yourself arging over everything, because you are so stressed out.
Question 6. Are you thinking of borrowing money from relatives or friends?
If so, it's probably because you've already destroyed all the sources of conventional credit that you used to have, and you are left with nowhere else to turn. Lenders who are in the business of evaluating credit risks won't touch you, because they think you can't be trusted to pay back what you borrow. Is it really fair to ask someone you know to bail you out with their hard earned money when you have handled your own so poorly? .
If you've answered "yes" to some of these questions, you should talk to a bankruptcy attorney and have a professional legal evaluation.