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What are the Top 10 Warning Signs of Bankruptcy?

1.         No health insurance or inadequate health insurance coverage. Medical and doctor bills are a huge factor in most bankruptcies.

2.         Dependence on credit cards for everything. If you use your credit cards to get cash advances to make minimum payments on other credit cards you are headed for disaster.  Credit card debt is the number one factor in every bankruptcy. Making minimum payments on credit cards and maxing out your credit cards are additional warning signs of insolvency.

3.         Over-using home equity loans. Before you use your home equity line of credit, make sure that you can afford to make the payments. Remember too, that your home equity line is secured by a mortgage – if you skip the payments, the bank will foreclose on your house.

4.         Living paycheck to paycheck with no savings for any emergency. Life happens and we all have to be prepare for emergencies. If you are relying solely on credit cards and you have no savings – you have a really high risk of going bankrupt if tragedy strikes.

5.         Co-signing a loan for anyone – including a relative – is a common factor in many bankruptcies when the person you co-signed for defaults on the loan payments and you’re held responsible by the lender. I have a case recently where the mother co-signed on the son’s mortgage. The son defaulted, the bank foreclosed and the mother was left holding the bag. Sad situation. The mother was forced to file a bankruptcy.

6.         A foreclosure on your home, the repossession of your car or any judgment entered against you will force you into bankruptcy. Nothing gets someone’s attention like a garnishment. Once the bank or lender sues you on the deficiency balance and gets a judgment against you – you better start thinking about your options – including bankruptcy.

7.         If you borrowing too much on student loans, you may find your student loan payments so high you can’t afford your day to day living expenses. In these cases, I find many clients resort to heavy reliance on credit cards.

8.         If you ignore your mail – or worse yet – throw your mail away before you read it, you may find yourself headed into a bankruptcy. I see it happen all the time. Clients get served with a complaint or other important papers through the mail – ignore it – then end up with a judgment against them. Nothing forces people into bankruptcy like judgments and garnishments.

9.         I talk to a lot of people that listen to the wrong people. They seem to get advice from everyone except the people that can really help them. I always tell clients: Take your problems to someone who can fix them. Take your financial problems to a  lawyer that can counsel you on your options concerning bankruptcy – not your brother in law or your hair stylist.

10.       Finally, many clients have stopped budgeting. They have no idea what kind of money that they need to meet their day to day expenses. Budgeting is one of the big benefits that comes out of consultation with me – you know exactly where your money is coming from and where it is going.