Columnist Brian O’Connell writes in Newsweek that U.S. consumers are expected to file 1.6 million bankruptcies by year end, the highest level since 2005. As the economy lingers in the doldrums, more Americans are going without health insurance. Many families are forced into bankruptcy when meeting living expenses without jobs or paying insurmountable health care costs. Although you may be well and have a job, it’s important to recognize potential signs of trouble in order to avoid appearing in bankruptcy court.

Getting the facts: Knowing what’s real, and where you stand

Having a wallet full of credit cards with high credit lines can provide a false sense of financial security; you figure you can handle unexpected expenses by whipping out the plastic. This may take care of an immediate need, but incurring high amounts of debt on high annual percentage rate (APR) credit cards creates debt that’s nearly impossible to pay off. The first step to avoiding bankruptcy is knowing how much you owe and what it’s costing you.

  • Using credit cards to cover household expenses: If you’re using credit cards as a bridge between buying necessities and payday, you’re heading for trouble. Consumer credit counseling and debt consolidation services can help.
  • No savings: Although financial experts prioritize paying off high cost debt first, it’s also important to establish a cash cushion for emergencies. Set up direct deposit to a dedicated savings account. Paying yourself first with direct deposit savings can help reduce your dependency on credit cards when unexpected expenses arise.
  • Co-signing loans: No matter how much your daughter wants a new car or your boyfriend needs help buying a gi-normous flat screen, co-signing loans for others can lead to bankruptcy. If the other party fails to pay, you are liable for full payment.
  • Large home equity loans: If you have a large home equity loan or line of credit, you are at double risk of mortgage foreclosure. If you don’t pay your primary mortgage, your home equity lender can foreclose, and they can also foreclose if you fail to pay them.
  • No health care coverage: Increasing numbers of Americans are going without health coverage due to unemployment and employers who do not provide coverage. One trip to the hospital can ruin you financially. Having health insurance (if you can find and afford it) is important to help prevent bankruptcy.

Debt help options include low interest debt consolidation loans, credit counseling and debt consolidation services, and establishing a financial plan with an accountant or financial planner.

Similar Posts: