It can be difficult for some to determine if a financially challenging situation is short-term and can therefore be weathered; or if their personal financial landscape has been irreparably damaged. While this blog isn’t comprehensive, the following situations may be seen as early warning signs that could lead to bankruptcy.
It should be noted that the millions of people who file bankruptcy are almost always good, hardworking, conscientious people. Financial problems can happen to anyone. Deciding to file bankruptcy should not be seen as a mark of shame or stigma or treated like a moral failure or act of weakness. In fact, it is your legal right and quite often the right and responsible thing to do!
We live in a world where many things are out of our control and in an economy that is unpredictable, unequal and unstable. Therefore, our ability to tackle or solve the scenarios below are often limited by our circumstances, which might suggest that bankruptcy is the right move for you.
Situations which May Lead to Bankruptcy
1. You spend more than you earn: While this habit can be maintained for a short time by staggering bill payments or using credit to help tide you over, this situation can quickly turn bad. An individual falls slightly more behind each month, always managing to stay just ahead of creditors. People who live above their means usually fall into real problems when something unexpected happens, such as a medical emergency or job loss.
To figure out if you are spending more than you earn, make a list of all monthly expenses and add them together. You should include all entertainment, gas and utility bills. If the total exceeds your monthly earnings, the situation calls for action. Some people may need to reduce their spending or perhaps pick up a small additional job, if possible. Managing your money can help prevent high credit balances you can’t afford.
2. You rely on credit cards: Everyone understands that credit cards can be helpful for emergencies, but maintaining high balances is one of the worst enemies of financial stability. Those looking to gain control of their finances should commit to paying off high-interest credit card balances, if possible. Taking a part-time job to pay off your credit cards in total is also prudent move. Rather than relying on credit cards for minor emergencies in the future, begin a savings account to handle situations that arise.
3. Maintenance or healthcare is deferred: While bankruptcy may not be looming, these types of situations can indicate that you may be in financial danger. Having to delay essential home maintenance, car maintenance or even personal medical care because of a lack of money may indicate an issue.
These delayed expenses may include necessary dental work, new eyeglasses or contacts, or refills of prescriptions. Homeowners may delay fixing their roof, allow plumbing leaks to continue or put off necessary car maintenance. These situations are troublesome because if minor issues are not fixed, they could become significant problems that are even more difficult to address.
As with all financial shortfalls, the answer is – if possible – to reduce unnecessary expenses, make some additional money and start a savings account for emergencies. Relying on credit cards always puts you in danger of not being able to afford payments as the balances rise.
4. You have no disposable income: It only stands to reason that if you have no money for entertainment or enjoyment, you also have no money for emergencies. Therefore, not being able to enjoy your life is an indicator of possible financial issues in the near future. Once again, if possible, you might need to adjust your spending or get a higher paying – or additional – job. If you can pay off all of your credit card balances, then you’ll have extra money each month to enjoy your life.
5. You are constantly stressed: Stress can cause a wide array of health problems, including high blood pressure, heart attacks, and stroke; as well as depression and anxiety. Money is considered to be one of the most significant stressors in life, and a lack of money is a danger to our overall health. If you find yourself always worried and anxious about your financial situation, it is not only bad for you, but may indicate you are headed to bankruptcy.
If you find yourself too far down the road financially and can’t fix the situation yourself, you may need to enlist the help of a local bankruptcy attorney.
Richard V. Ellis is a Sarasota bankruptcy lawyer dedicated to assisting individuals and families in regaining financial stability and independence.