Eight Warning Signs That You May Be Headed for Bankruptcy

And Eight Tips for Avoiding It
Bankruptcies are at an alarming level in the United States. Bankruptcy doesn't happen just to financial deadbeats. It could happen to your family member, your neighbor, your friend. It could even happen to you. Here are eight warning signs that you're headed for possible bankruptcy, and eight tips for avoiding it and changing course before it's too late.

Bankruptcy Warning Sign #1: No health insurance or inadequate coverage. Medical bills are a factor in one out of five bankruptcies.

Bankruptcy Warning Sign #2: Maxing out on your credit cards or charging more than you can pay off each month. Credit card debt is one of the major factors in many bankruptcies. A good rule of thumb is to use no more than 30% to 40% of your available credit at any one time. This gives you flexibility in case of job loss, illness, divorce, or other threat to your income.

Bankruptcy Warning Sign #3: Over-using home equity loans. Think twice before you use your home equity loan or line of credit for items other than home improvements. Make sure you can afford the payments comfortably.

Bankruptcy Warning Sign # 4: No emergency fund. If you live from paycheck to paycheck with little or no savings for emergencies, you're at higher risk of going bankrupt. 43% of American households have less than $1,000 saved, an alarming statistic.

Bankruptcy Warning Sign #5: Paying the minimum balance on your credit cards. Since it can take 20 to 30 years to pay off your credit card balance when you pay only the minimum payment, if that's all you can afford to pay, you really can't afford to buy whatever it is you've been buying.

Bankruptcy Warning Sign #6: Co-signing a loan for someone else. Co-signing loans 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.

Bankruptcy Warning Sign # 7: Tax lien or foreclosure on your home, or repossession of a car or other item you failed to make timely payments on. These are signs that you've lost your grip on your financial situation. Take them seriously.

Bankruptcy Warning Sign #8: Borrowing too much on student loans. You may end up finding your student loan payments so high you can't afford your living expenses.
The key to avoiding bankruptcy or other, less dire but no less unpleasant financial problems is to have a firm grip on your finances by following these eight tips:


Avoid impulse spending.

Don't use a credit card unless you have the cash to pay it off.


Tear up credit card offers you receive in the mail.

Set up a budget and stick to it.

Don't buy more house than you can comfortably afford.

Make sure you're adequately covered by insurance (medical, homeowners, auto).

Don't make speculative or high-risk investments.

Don't incur joint debt with others who have questionable financial habits.