Top Signs It Might Be Time to Consider Bankruptcy in Texas

Wondering If Bankruptcy Could Be Your Next Best Move?

Are you feeling like debt has you running in circles? Maybe it’s starting to feel like you’re working just to keep creditors at bay or that no matter how much you pay, your balance doesn’t seem to budge. Debt can feel like an endless game of Whack-a-Mole, but if you’re struggling to regain control over your finances, bankruptcy could be your best path to a fresh start.

In this guide, we’ll go over the top signs that it might be time to consider bankruptcy in Texas. From struggling with high-interest credit cards to constantly dodging collection calls, there are some clear indicators that show when it’s time to think about filing. We’ll also address common concerns and help you assess whether bankruptcy is right for you. Let’s jump in and tackle the warning signs, so you can make the best decision for your financial health!

1. You’re Only Making Minimum Payments—Or Can’t Make Them At All

One of the most telling signs that debt has gotten out of control is when you’re only able to make minimum payments on credit cards or loans. If you’re just covering interest and not touching the principal balance, it can feel like you’re making payments forever without seeing any real progress.

Why does this happen? High interest rates and fees add up fast. In many cases, the bulk of your payment goes straight to interest, which means the balance itself barely moves. If you’re paying month after month but never seeing a drop in your total debt, it might be time to consider options like Chapter 7 or Chapter 13 bankruptcy to help you reset your finances.

2. You’re Using Credit to Cover Essentials

Using credit cards or loans to pay for groceries, gas, or rent? This is a big red flag. When essential expenses are being paid with borrowed money, it can quickly lead to a downward spiral. This type of cycle can become very hard to break out of, as interest piles up and available credit shrinks.

Credit should ideally be used for manageable expenses you can pay off each month, not day-to-day needs. If your budget has become so tight that you need credit to get by, it’s a strong indicator that it’s time to evaluate long-term solutions like bankruptcy to restore your financial stability.

3. Collection Calls and Threatening Letters Are Part of Your Daily Life

Nothing is more stressful than a phone that won’t stop ringing with collection calls, or letters that pile up with red “past due” stamps. While there are legal protections against harassment from debt collectors under the Fair Debt Collection Practices Act, if you’re frequently facing threats of legal action or wage garnishment, it’s time to think about your options.

Bankruptcy offers immediate relief through what’s called an automatic stay. This legal protection stops most collection efforts, giving you breathing room and allowing you to regain control of your finances without the constant pressure of aggressive collectors.

4. You’re Behind on Your Mortgage or Facing Foreclosure

If you’re falling behind on mortgage payments or facing foreclosure, it’s a serious sign that debt may be outpacing your income. A missed payment here or there might seem manageable, but falling behind consistently can mean you’re at risk of losing your home.

In Texas, filing for bankruptcy can halt foreclosure proceedings through the automatic stay, giving you time to catch up on payments or negotiate new terms with your lender. Chapter 13 bankruptcy is especially useful here, as it allows you to set up a manageable repayment plan over three to five years, helping you keep your home and get back on track financially.

5. Medical Bills Are Draining Your Savings

Medical debt is one of the leading causes of bankruptcy in the United States. If unexpected medical expenses have drained your emergency fund or put you in debt, bankruptcy can be an effective way to manage those bills and reduce financial stress.

Texas offers generous exemptions for medical debt in bankruptcy, and filing can help discharge or reorganize these debts so you’re not paying them off indefinitely. Medical debt is often classified as unsecured debt, which means it’s more likely to be discharged in Chapter 7 bankruptcy or included in a manageable repayment plan in Chapter 13.

6. Your Credit Score Is Tanking

When your credit score starts to slide, it can signal that your debt has become unmanageable. Missed payments, high credit utilization, and collections can quickly bring your score down. A low credit score makes it harder to secure new credit or qualify for favorable loan terms, which can feel like you’re stuck in a financial rut.

While bankruptcy does affect your credit score, it also gives you a chance to hit reset. After bankruptcy, many people find it’s easier to rebuild their credit than they expected, especially with responsible credit habits. If your score is dropping, bankruptcy might actually offer a path to a better financial future.

7. Your Debts Exceed Your Assets

If your debts significantly exceed the value of your assets, bankruptcy could be a smart way to manage or even eliminate that debt. In situations where you owe far more than you own, trying to repay debts without bankruptcy can be an uphill battle.

Filing for bankruptcy in Texas allows you to protect certain assets through exemptions, such as the Texas Homestead Exemption, which shields your primary residence from creditors. This can make bankruptcy an attractive option if you have large debts but also want to preserve important assets like your home.

8. You’re Considering Raiding Retirement Accounts to Pay Off Debt

It’s tempting to dip into retirement funds when debt becomes overwhelming, but this is often a risky move that can put your future at stake. In Texas, retirement accounts like 401(k)s and IRAs are generally protected from creditors in bankruptcy, meaning you won’t lose these funds if you file.

If you’re thinking about using retirement savings to pay off debt, it might be time to explore bankruptcy instead. Keeping your retirement intact while managing your debt through bankruptcy can be a far better long-term financial decision.

9. You Feel Overwhelmed, Stressed, and Unable to See a Way Out

Sometimes, the biggest sign is how you feel. Financial stress can affect every area of your life, from your physical health to your relationships. If you’re constantly worried about money, avoiding bills, or feeling like there’s no way out, bankruptcy might provide the relief you need.

Bankruptcy isn’t just a financial tool—it’s a way to relieve the mental burden of unmanageable debt. Starting fresh can restore your peace of mind, giving you the clarity to make healthier financial decisions moving forward.

What Bankruptcy Options Are Available in Texas?

If you’re seeing yourself in some of the signs above, you might be wondering what your options are. The two main types of bankruptcy for individuals in Texas are Chapter 7 and Chapter 13.

• Chapter 7 Bankruptcy: This option, also known as liquidation bankruptcy, is typically used by those with limited income. It discharges most unsecured debts, like credit cards and medical bills, within a few months. While some assets may be sold, Texas exemptions usually protect essentials, like your home and car.
• Chapter 13 Bankruptcy: Known as reorganization bankruptcy, Chapter 13 lets you keep your assets while setting up a repayment plan that lasts three to five years. This is ideal for people with a regular income who want to catch up on secured debts, like mortgages or car loans, without losing their property.

Both options come with their pros and cons, so consider speaking with a bankruptcy attorney to determine which is best for your situation.

Is Bankruptcy Right for You?

Bankruptcy can be a daunting concept, but it’s often a smart decision for people struggling with insurmountable debt. It’s not a sign of failure or irresponsibility; it’s a legal tool designed to help you take control of your finances and get a fresh start.

If any of the signs in this list resonate with you, it might be time to seriously consider bankruptcy as a path forward. Rather than struggling with mounting debt, bankruptcy allows you to relieve stress, protect assets, and rebuild your financial life.

Ready to explore your options? Visit Kisch Consumer Law to connect with experienced Texas bankruptcy attorneys who can help you evaluate your situation and decide if bankruptcy is the right choice. Our team is here to guide you every step of the way, so you can start fresh with confidence and peace of mind.