Deciding when financial strain has reached an unmanageable level can be a difficult task. It is hard to know when the situation has reached a point at which looking at bankruptcy protection is the best course of action. In the weeks following the beginning of a new year, addressing financial concerns is on the top of many to-do lists. For many in Maryland, however, a close examination of personal finances will uncover several factors that can combine to make bankruptcy the clear choice.

One sign that bankruptcy is on the horizon is when an individual’s monthly debt service exceeds 20 percent of their take home income. This can also lead to financial strain in other areas, as there may be little left to cover living expenses or build an emergency fund. A sign that debt has reached an unmanageable level is when consumers have to withdraw money from savings in order to pay their debts each month.

Another sign of trouble comes in having to rely on credit cards to cover basic living expenses between pay periods. The same applies to opening new cards to pay for existing accounts. Consumers who find themselves making only the minimum monthly payment on open lines of credit are also reaching a financial line in the sand, beyond which something must change in order for stability to be re-established.

Perhaps the biggest sign that bankruptcy protection is needed is when consumers don’t have a clear idea of exactly how much they owe, or what it would take to pay all of their debts down over a relatively short period of time. In such cases, it may be time to sit down with a bankruptcy attorney and review the available options. For many in Maryland, consumer bankruptcy offers a relatively fast path back to financial stability.

Source: ocregister.com, “Overextended credit and personal bankruptcy”, Cathi Douglas, Jan. 2, 2015