7 Signs That You May Be Headed For Bankruptcy
The city of Detroit filed for Chapter 9 bankruptcy on July 18, 2013. While the city is not the first to resort to such financial measures, with an estimated debt that is somewhere in the range of $20 billion, it is the largest municipal bankruptcy filing in U.S. history when ranked by debt.
But how did the city know when it was time to file? And what conditions would lead to putting a city’s finances in such dire straits that they would even consider such a move as to file Chapter 9? Surprisingly it is not that different than when individuals resort to making similar decisions.
Ashby Jones, a reporter for the Wall Street Journal Law Blog, explains, “The beleaguered City of Detroit threw in the towel on Thursday, after having watched its middle-income tax base slowly shrink over a period of decades and, more recently, having reached an impasse with its largest creditors in negotiations.”
Are You at Risk for the Same Fate as the Motor City?
According to the U.S. Bankruptcy Courts website more than 1.2 million petitions for bankruptcy were filed in 2012 alone. While that number is down 14% from the previous year, it still represents a large number of people in financial trouble (http://www.uscourts.gov/).
Believe it or not, a lot of these people in financial trouble are otherwise perfectly normal, average people. They could be your neighbors, your friends, your family members, someone at your church — and if you fail to heed the warning signs, then it could be you, too!
Nobody who faces bankruptcy gets there without warning. There are always some types of clues that point out that the person is headed for dire financial straits. Here are some of the major signs that you could be headed towards a meeting with an attorney regarding filing for bankruptcy.
- INSURANCE – People who file for bankruptcy often have inadequate health insurance coverage. Some have no coverage at all. This leads to outstanding medical bills which account for nearly 20% of all bankruptcies in the United States.
- CREDIT CARDS – It is perfectly fine to have credit cards, as long as you use them responsibly. However if you charge more than you can pay off each month, then you may be on your way to a financial disaster.
- HOME LOANS – If you overuse your home equity loan as a line of credit for something that has nothing to do with improving the quality of your home, then you could be in trouble. This is especially true if you cannot comfortably cover the cost of the added payments.
- NO SAVINGS – If you have no savings for emergencies, and live from one paycheck to the next, then you fall into the high-risk category of people who file for bankruptcy. Some research shows more than 40% of adult Americans have less than $1,000 saved for emergencies!
- PAY THE MINIMUM – If you only pay the minimum on all of your bills each month, it is not a good sign. This is especially true for credit card payments, where high interest rates can add so much that you pay for your original purchase several times before reaching a zero balance.
- CO-SIGNING – If you co-sign on someone else’s loan and they stop paying, the lender will hold you responsible. If you must co-sign, make sure the person you are helping out is not going to help you into the attorney’s office instead.
- FORECLOSURE – If the bank is foreclosing on your home, your car is being repossessed, or your personal property is strapped down by heavy tax liens, then these are all signs that you are facing a downward financial spiral.
You Can Avoid Bankruptcy
Avoiding bankruptcy is easier than you might think. Some people resort to extreme measures such as freezing their credit cards in enormous blocks of ice. However a lot of avoiding bankruptcy is little more than self-discipline and common sense.
For example, avoid impulse shopping. Some people call this retail therapy. It is easy to use a credit card to rack up huge, emotional purchases when you do not have the cash to pay for them. Those new Jimmy Choo slingback pumps might make you feel better now, but imagine how you will feel when you get the credit card bill — plus interest!
Follow these tips and you can enjoy a comfortable lifestyle without the cloud of debt over your head. And you will probably save yourself a trip to the bankruptcy attorney in the process!
Denver freelancer Benjamin Baker always uses sites such as www.travisblacklaw.com to research facts when writing articles with legal topics. Working from home gives this research hound plenty of opportunity to spend with his lovely wife and their three busy, growing teenagers. In his spare time Benjamin enjoys camping, fishing, and visiting junk yards and antique shops in hopes of locating old tools and retro signs for his man cave.