Bankruptcy is often viewed as a last resort for some people. Working hard and bringing home a good living is part of what people do best. Oftentimes, there are circumstances that are beyond a person’s control and it leaves them little to no options. So who is at risk for having to file bankruptcy? There are many warning signs and indicators that point to a dangerous path that leads straight for the bankruptcy court. How does one know if they are at risk?
Maxing Out Credit CardsIf a person has several credit cards, or cards with high balances, this can be a problem when times of financial strain occur. Those who max out their credit cards will find themselves with a higher debt to ratio and the inability to get loans as easily. The higher a credit card balance, the more a person has to pay in interest and monthly payments. Credit card companies now require higher monthly payments and some people may find it hard to come up with the minimum. A big warning sign of immediate danger is seeing which credit card has any money left on it to buy gas or any other necessities. When the cards are all maxed out, then it is time for an evaluation of overall debt and spending.No Medical Insurance
Some people feel that medical insurance is an unnecessary expense. While a person may be in good health, they can never be certain when a medical disaster will strike. Not having medical coverage could rack up thousands of dollars in medical bills. Because of the drastic amount of collections hospitals face, they usually have outside collection agencies handle their billing. These agencies can be very aggressive and can use whatever means to collect their debts, including wage garnishment. It is a good theory to think that a family can save money by opting out of medical coverage, but it is not a very wise financial decision.
No Savings Account
Families that are living penny to penny or paycheck to paycheck are in great danger of bankruptcy. Those that have a savings account that they can fall back on, have a cushion to help thwart disasters. Having no money put aside for a rainy day and having no extra money is a problem that most people face. When something happens, like an appliance goes out, the car breaks down, or any other event, having no savings may mean taking bill money to fix issues. Borrowing from bill money often can create a deficit that is nearly impossible to fix.
Co-Signer on A Loan
Some loan companies want co-signers in order for a transaction to go through. When a person is a co-signer that leaves them financially responsible for the debt of the party they signed for. If the other person does not pay their bills, then the co-signer must make the full payments or their credit is in jeopardy. If a co-signer does not have the money to pay these payments, it can negatively impact their credit and their relationship with this person. Co-signing on a bill is never a wise decision.
Repossession or Foreclosure
If monthly payments are getting behind and a bank has issued a repossession or foreclosure action, this is a huge warning sign. Not having the money to meet monthly obligations is a big problem for most people. According to personal bankruptcy statistics this problem has only got bigger during economic crisis. When a home or car is taken away, this makes a huge mark on the credit report and makes obtaining new loans next to impossible. When faced with the bank seizing their property, this is something that is an almost automatic path to the bankruptcy court.