Bankruptcy Warning Signs

Posted by Sep24, 2014 Comments Comments Off on Bankruptcy Warning Signs

If you are experiencing more than one of these warning signs and have accumulated debt you cannot afford to repay, you may be on the verge of bankruptcy.

1. You are living paycheck to paycheck and you have no savings.

If you are living from paycheck to paycheck, you are spending your money as quickly as you receive it, and you do not have any set aside for a “rainy day.” That means any unexpected event (i.e. vehicle repairs) can easily cause you to fall behind on your credit cards and other accounts.

2. Your debt-to-income ratio is high.

Your debt-to-income ratio is the percentage of your monthly income that goes towards paying your debts. For example, if your income is $2000 and your debts are $1000 per month, your debt-to-income ratio is 50%. Lenders use your debt-to-income ratio to determine if they will approve your loan application. Generally, they do not want to see that you owe more than 40% of your monthly income to your debts. So, a debt-to-income ratio of 50% is significantly high.

3. You can barely make the minimum payments due on your credit cards.

When you pay only the minimum payments due on your credit cards, only a small portion, if any, is applied to the actual principal you owe, and the remaining balance likely incurs additional interest. If you’ve been unable to pay more than the minimum payment on your credit cards or other accounts for an extended period of time, it’s likely you are nowhere near paying off the debt.

4. You owe substantial medical bills and expenses.

According to recent studies, nearly half of all bankruptcies nationwide can be attributed to substantial medical bills. If you have inadequate health insurance or none at all, you’re at risk of incurring substantial medical expenses due to unexpected injuries or illnesses. A significant rise in medical costs can ruin your personal finances, and force you to file bankruptcy.

5. You are unable to make your monthly mortgage payments.

Many homeowners are having a difficult time making their monthly mortgage payments. If you’re struggling to make your mortgage payments and are in risk of losing your home to foreclosure, you should consult a bankruptcy attorney immediately. In many instances, chapter 13 bankruptcy can prevent you from losing your home to foreclosure, or you may be able to get out from under a house that’s not worth what you owe on it via chapter 7 bankruptcy.

If you are experiencing one or more of the warning signs listed above, it’s time to evaluate your finances and see if you need the help of a bankruptcy attorney. Whatever you do, do not make your situation worse by putting it off.  Call us today at (520) 743-2257 or email us at Kathy@kathyjohnsonlaw.com for a free confidential consultation to determine your options.

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