Four ways debt can ruin your life and how bankruptcy can help

Debt can cause problems, bankruptcy may be the answer.

Falling behind on payments for credit cards, loans or other financial obligations can happen to anyone. In fact, a recent publication by Nerdwallet reports that the average American household is $125,579 in debt with an average of $15,355 debt on credit cards alone.

This debt can lead to a number of problems, but four of the more common issues debt can cause include:

  • Setting up for financial ruin. Living paycheck to paycheck and just barely making minimum payments, if at all, on financial obligations can set you up for financial ruin. What will happen if faced with an unexpected emergency? If the furnace dies, the car breaks down or you find yourself faced with any other high cost repairs? For some, the answer may be to cash out retirement savings. This practice is not recommended as it generally increases the risk of future financial ruin. This is true for two reasons: the funds no longer increase with interest over the years to help provide a nest egg when you reach retirement age and the funds are also often penalized when taken out early.
  • Increasing the amount you owe. Having a large amount of debt can be a downward spiral. Debt can lead to even more debt. Examples include added penalties and fees on credit cards that do not receive payment each month as well as interest added on balances that carry over and overdraft fees from bank accounts.
  • Reducing the amount you take home from work. In some cases, debt can lead to wage garnishment. Wage garnishment is a legal process that allows the creditor the ability to pull payment directly from an individual's paycheck before the employee is paid. In New Jersey, this process is also referred to as a wage execution.
  • Living in stress. Debt can cause stress. A lot of stress. This can translate to arguments over finances with loved ones. It could also lead to spending more hours at work in an attempt to increase your funds and pay off more debt, taking away the time you have with family.

Those who find that their debt has become unmanageable may benefit from bankruptcy.

How bankruptcy can help

A successful petition for relief through bankruptcy results in an automatic stay. This court order requires creditors to cease seeking payments, ending collection calls and putting a stop to wage executions. Depending on the chapter of bankruptcy you choose, the next step generally results in either a more manageable, court supervised repayment plan with a Chapter 13 bankruptcy or a process that discharges most debts with a Chapter 7 petition.

Determining the option that is best for your situation depends on a number of factors, including your debt and income. Contact an experienced bankruptcy lawyer to discuss your situation and develop a plan that is best for your future success.