Consumer Law

Five Signs You Could Be Heading For Bankruptcy

By M. Stan Herring

Newsweek.com has posted an article that gives five signs that could mean you're headed for bankruptcy. The number of bankruptcies in the US has continued to increase. 1.6 million filings are expected to be made before the end of this year, putting bankruptcy at its highest since 2005.

In 2005 Congress tried to limit the number of bankruptcies by instigating the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). But bankruptcies continued anyway.

?While the 2005 bankruptcy overhaul law aimed to reduce filings, overall consumer debt and continued financial stress have led to consumer bankruptcies climbing back to pre-BAPCPA levels,? said ABI Executive Director Samuel J. Gerdano. ?We expect that there will be nearly 1.6 million new bankruptcy filings by year end.?

To avoid being one of those 1.6 million filings, here are five warning signs that you might be headed for bankruptcy, if action is not taken:

-You're using credit cards to pay for necessities like groceries and housing. Credit cards aren't designed to be used to pay monthly bills, such as your mortgage, especially if you already have an unpaid balance.

- You don't have health insurance. Since the Healthcare Bill is still several years away, not having health insurance right now can be a disaster. Studies show that medical bills are a big reason for people to file bankruptcy. If you're uninsured and have an accident or chronic illness you can drive yourself to bankruptcy quite easily.

- Abusing a home equity line of credit ? This one is hard to accomplish these days, as banks have really tightened the reins on home equity loans. But if you fall behind on your home equity payments, the bank treats it like you?ve fallen behind on your mortgage ? and it could try to foreclose on your home. It?s imperative that you keep up to date on your home equity payments ? banks and mortgage lenders are watching those payments very closely.

- Living paycheck to paycheck is another tell-tale sign. Not having any savings sets you up for serious financial straits if you were to become sick, injured or unemployed.

- Co-signing loans. Even co-signing with a family member can be bad for you. If the other borrower forecloses on the loan the bank will come to you looking for payment. If you can't pay the loan in full, then it's your responsibility. Co-signed loans are another main cause of bankruptcy proceedings.

If you have interest in filing bankruptcy and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on October 20, 2010 (boomark / email).