Most people facing significant debt accumulate it over time. There are individuals who have some kind of catastrophic event, such as a car crash, that directly leads to financial duress. For most other people, debt is a slow trickle that eventually builds into a unstoppable deluge.
Debt is quite common among most American households, even when there is more than one wage earner in the house. All you have to do is spend a little bit more than you make every month to find yourself underwater in debt eventually.
Making excessive purchases with the intent to pay over time can lead you into financial hardship that can be difficult to recover from. Debt issues can happen to just about anyone, and bankruptcy is often the quickest and simplest solution for overwhelming debt.
It isn't just the purchases, but also interest and fees
One of the biggest mistakes that people make when dealing with credit is that they fail to take financing charges into account when developing a budget. They may plan to pay off the initial amount they spent, but they aren't considering the interest that accrues.
Most credit cards have interest rates of 20 percent or even higher, meaning that financing charges add up relatively quickly. The longer you take to pay off an item, the higher the amount of interest you end up paying for that item. You could pay several times the purchase price of the item by the time you finish paying your credit card bill.
Once you get close to your credit card limit, you are also at risk of substantial fees. Over-limit fees, late payment fees and other charges can increase your balance even more, adding to how much you owe. When you can no longer keep your credit cards below the limit or can only make minimum payments each month, you may be in a situation that demands action.
Bankruptcy serves like a financial reset button
Although there is still social stigma attached to bankruptcy, it can be beneficial for individuals facing financial stress. Instead of worrying about what people will think, you may want to consider how bankruptcy could benefit you.
As soon as you file for bankruptcy, you receive the protection of an automatic stay. That stay prevents creditors from harassing you or taking other steps, such as garnishing your wages. Once the bankruptcy process is finished, your unsecured debt will receive a discharge, meaning you no longer have an obligation to repay it.
If you aren't able to make a significant dent in your credit card debt and you feel worried about collection activity, it may be time to talk to a bankruptcy attorney about your options for getting rid of that debt and moving on with your life.