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Bankruptcy ahead: What are the warning signs?

The decision to file for bankruptcy is not always straightforward. Understanding how you got into debt in the first place may help you decide the best way to get out of it. Was your debt the result of a medical emergency, a job loss or some other unforeseeable event? Or was it the cumulative result of spending habits that were perhaps unsustainable?

Only you can decide if bankruptcy is appropriate for you (preferably after consulting an experienced attorney). That being said, there are often warning signs that your financial situation may soon make it necessary to file for bankruptcy.

A recent article on the Daily Finance website discusses some of these warning signs. Some have to do with spending habits, especially spending on credit cards. You might be in trouble if:

  • You have maxed out or nearly maxed out your available credit
  • You don’t know how much money you owe in credit card debt
  • You can’t afford your current lifestyle without using credit cards
  • You have overdrawn your checking account two or more times in the past year
  • Your monthly rent or mortgage payment is more than 28 percent of your gross salary

The article also discusses warning signs based on how reliably you make recurring payments. This includes forgetting to pay and not having the money to pay on time. You might be in trouble if:

  • You have a credit score below 600
  • You are not current on your car payments
  • You are getting calls from debt collectors
  • You need to rely on very expensive sources of money including payday loans
  • You need to borrow money from your retirement account(s)

These are not hard-and-fast rules. And even if most of the above statements describe your situation, this doesn’t mean that bankruptcy is the only option for debt relief. Instead, these statements may help you decide if bankruptcy is something you should consider. If you have questions or would like to discuss your options, please contact an experienced bankruptcy attorney.

Source: Daily Finance, “10 Signs You Are Headed Toward Financial Ruin,” Ellen Chang, Sept. 19, 2014

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