As interest rates reach their highest levels in decades and inflation remains stubbornly persistent, American businesses feel the squeeze. The tightening of monetary policy has led to a surge in bankruptcy filings, surpassing the numbers in recent years.
According to data from S&P Global Market Intelligence, the number of U.S. companies seeking bankruptcy protection in 2023 has already surpassed the figures from the first five months of any year since 2010, with May alone witnessing 54 corporate bankruptcy petitions.
But when does bankruptcy become a practical option? Let us explore the factors that can help determine when bankruptcy may be a good idea.
- Overwhelming debt: If you are drowning in debt and struggling to make ends meet despite your best efforts, bankruptcy may provide relief. It can help you eliminate or restructure your debts, giving you a fresh start.
- Inability to pay bills: When you cannot keep up with monthly payments, it can create a cycle of financial stress. Bankruptcy can alleviate the burden and supply a path toward regaining control of your finances.
- Constant harassment from creditors: Relentless calls, letters and threats from creditors can significantly affect your mental and emotional well-being. Filing for bankruptcy triggers an automatic stay. It may halt creditor actions and provide you with a respite from harassment.
- Risk of foreclosure or repossession: Bankruptcy can halt foreclosure proceedings if you risk losing your home due to mortgage default or facing vehicle repossession. It may allow you to catch up on missed payments or negotiate more favorable terms.
- Unmanageable medical debt: Medical bills can skyrocket quickly. It may leave individuals with insurmountable debt. Bankruptcy can help alleviate the burden of medical expenses so you can focus on recovering your health without the added stress of financial obligations.
- Legal protection: Bankruptcy offers legal protection against creditors. It may prevent them from pursuing legal actions, garnishing wages or seizing assets. This protection provides peace of mind as you work toward a more stable financial future.
It is important to note that bankruptcy should not be considered a first option. Exploring alternatives, such as debt consolidation or negotiation with creditors, may be worth pursuing before taking the bankruptcy route. Consulting with a qualified bankruptcy attorney can help you understand the potential consequences and explore other options.