There can be numerous signs of a person heading towards bankruptcy, but when times get tough, we may be too blindsided at the moment to realize it. Here are some signs that you may be heading to bankruptcy.
- Inadequate coverage for your health. Medical bills are one in the five factors of bankruptcies.
- Maxing out your credit cards or as some say, “wining and dining on a beer budget”. Credit card debt is one of the biggest reasons people go into bankruptcy. Sometimes, we may end up overspending and not realize it — or realize it but fail to act upon it. A good tip is to use no more than 30-40% of your available credit. This provides help in case you run into situations such as a job loss, illness, divorce, or any other threats to your income.
- Taking out more than you can handle on your home equity loan. Talk to a friend or a family member before taking out a credit line you’re your home. Will you be able to pay it off? Is it important? Sometimes it’s better to keep that credit line only for home improvements. If you decide to pull it out, make sure you can make your payments comfortably.
- No backups. If you’re living from paycheck to paycheck with little to no savings for emergencies, you can be at a higher risk for bankruptcy.
- Only paying the minimum on your credit cards. Because paying off your credit cards—while paying the minimum—can take 20-30 years, make sure what you’re buying now is really worth 20-30 years of paying it off.
- Co-signing troubles. Careful who you co-sign for, especially if you know that they aren’t so good with their own financials. It’s common factor for many bankruptcies when the person you sign for defaults, and you are held responsible by their lender.
- Receiving a tax lien or your home becomes foreclosed because you fail to make payments on time.