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Tell-tale Signs youre heading toward Bankruptcy

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By: Jon Clarke
on 21st Nov,2013

If you find yourself helpless and scared in the face of debts and credit card payments, chances are that you have gone bankrupt.
Tell-tale Signs youre heading toward Bankruptcy


If you find yourself helpless and scared in the face of debts and credit card payments, chances are that you have gone bankrupt. The social stigma attached with this word can affect your future in good ways (yes, sometimes it can) and bad. But what do you do when you are genuinely in debt and just cannot pay off your creditors?


If you're neck-deep in debt, then announcing bankruptcy might seem like an easy way out and hence, a tempting way to get out of the debt trap. As convenient as it sounds, it may not be helpful. Before you decide to throw in the towel and hand over your finances to a court, it would be a good idea to consult an expert bankruptcy attorney in your local area for proper guidance.


Many experts have pointed out the increasing role of over-consumption and over-spending in bankruptcy declarations. In the Age of Consumerism, many people have gotten into the habit of living beyond their means and spending more on things that they want rather than things that they need. Looking for convenient options to get rid of creditors may not always work. Unable to suppress their need to spend, they get into financial complications which leads to them buy into certain misconceptions about filing bankruptcy.


Read on to know about some of the classic early warning signs that tell you that you might not be as far away from bankruptcy as you think you may be:

Let your credit score decide


A credit score is nothing but an individual's creditworthiness. In other words, it reflects your financial health. A score, which is based on numerical analysis of a person's outstanding financial liabilities, is allotted to him/her. A good credit score has many benefits and can make it easy for you to use financial instruments to your advantage. A bad credit score, in turn, can badly affect your financial life and make it difficult for you to apply for loans or to get credit.    


One of the first signs of moving in the direction of bankruptcy is when you find that your credit score is constantly deteriorating.

Credit card payments


Do you find yourself making just the minimum required credit card payments each time (or no payments)  just because you never seem to have enough money to pay fully at the end of each month? If yes, you might want to take a look at your spending habits and reconsider your consumption.

Borrowing money


If you've been borrowing money all the time from your relatives or friends just to be able to meet your basic expenses, you know you're heading full speed toward bankruptcy. Borrowing money is not a bad sign if you can pay it back within a stipulated time frame. But if you cannot do that, it might be time for you to start worrying.  

Savings


Your hard-earned money needs to be saved safely and wisely for you to be able to meet emergency expenses without having to borrow from others. However, you know you're in trouble when you dig into your savings to pay for mounting debts.

Bouncing checks


You want to make those payments and get them over with, but insufficient funds are stopping you from doing that. Your checks are bouncing and that can never be good for anyone. If this has been happening too frequently, it's time to sit down and take a hard look at your finances.


They say 'prevention is better than cure.' It is important to know what you can do in order to prevent yourself from going bankrupt. Here are a few tips:

● Have a financial plan: And by this we mean a long-term plan. Always know what you need to spend on and buy only that. If you know you're going to borrow money or take out a loan, ensure that you have a plan in place as to how would you be paying the amount back. Never forget that if you've taken a loan, you would be repaying the amount with interest. Hence, borrow only as much as needed and possibly for a short period of time.

● Limit the number of credit cards you own: As far as possible try to keep just one or two credit cards to make your payments. This allows you to keep track of your payments – all at one place and also deters the use of paying through the card, thereby helping you control your expenses. Don't forget that credit cards come at a cost too – fees and interest.

● Debt consolidation: When you consolidate all your debts into one plan, you are required to pay toward it monthly, at a lower interest rate, which makes the payment much cheaper. You can even consider the debt settlement option wherein an expert would negotiate on your behalf with your creditors to reduce your debt amount and formulate a better payment strategy.

● Credit counseling: These agencies are set up to counsel people who are drowning in debt. Their counseling relates to aspects that can help you rebuild and strengthen your finances, take care of your budgeting concerns and also suggest payment plans most suited to your case.


Keeping these points in mind will help you determine what filing for bankruptcy entails. It's always better to do your homework beforehand and get your facts right before jumping into unfamiliar territory. Make sure you do your research well and get enough expert advice before you decide to file for bankruptcy.

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