Over the years, we have seen many rich and famous people declare bankruptcy that the concept is no longer foreign to us. Is it possible to foretell if someone will go bankrupt? There might not be a precise formula for determining everything and telling whether or not you need to be concerned, but there are a few red flags to look out for.

Bankruptcy, as the name implies, is a circumstance in which you do not have the ability to pay your current debt obligations in full based on your current financial situation. There are several warning signs to look out for to prevent bankruptcy and you should be concerned if you notice any of them. Read on to learn more about signs that could mean you are headed towards bankruptcy.

WHAT YOU NEED TO KNOW ABOUT DECLARING BANKRUPTCY IN CALIFORNIA

If you're thinking about filing for bankruptcy, you've probably been through a lot financially. You've probably heard of a slew of famous personalities filing for bankruptcy and you're well aware that likely due to a lack of funds and potentially bad financial management choices. Bankruptcy entails finances but it does not necessarily imply that someone has poor money management skills or that he or she is a slacker for having reached this stage in life.

Unexpected economic situations can drive individuals, as well as businesses, to declare bankruptcy, particularly if they owe money and are being pursued by creditors. Federal bankruptcy rules allow those who are having financial troubles and are unable to settle their debts to file for bankruptcy as a form of relief.

The following are some of the most common types of bankruptcy chapters that could assist you in getting out of debt:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, provides you with relief from the majority of your financial obligations and bills. However, if you file for this type of bankruptcy, you need to realize that you are authorizing the Bankruptcy Court to liquidate your non-exempt assets (if any), which could include your home and car, for the proceeds to settle your debts.

If you own assets that would be considered non-exempt in a Bankruptcy case and you do not wish to have those items liquidated, then this Chapter of Bankruptcy would not be recommended. Rather, you can consider filing a different type of bankruptcy, such as Chapter 13.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, often referred to as reorganization bankruptcy, allows you to clear your financial obligations without jeopardizing your valuable assets or properties. This type of bankruptcy will benefit you if you are presently working and have a consistent income but are unable to settle all of your bills and debts at once.

Chapter 13 bankruptcy allows you to resolve your debts without having to rush into a repayment schedule with your creditors. Due to the "automatic stay," of the bankruptcy every creditor and other persons you are indebted to, such as your landlord, would have to cease any debts or rent collection operations if you declare Chapter 13.

If you're in a precarious financial position and have exhausted all other options, submitting a bankruptcy petition may be an excellent way to start over and lead a more manageable financial lifestyle. You will observe certain red flags before deciding to submit bankruptcy paperwork, alerting you of your current economic status and the possibility of going bankrupt.

SIGNS YOU ARE HEADED TOWARDS BANKRUPTCY

If you're having financial difficulties, it's not guaranteed that you'll have to file for bankruptcy. A chain of financial setbacks can occur simultaneously, presenting you with little choice except to file for bankruptcy to reclaim control of your finances.

Identifying the below red flags or warning signs that you're on the verge of bankruptcy will help you decide which type of bankruptcy to declare for a clean slate:

Persistent Phone Calls or Text Messages from Creditors

When you find yourself growing anxious whenever you get a call from an unknown number, it's safe to assume you know the caller as well as what they need from you. When you do not pay your bills timely, they can pile up and become too much to handle at once. Once you get to this point, you can expect phone calls, texts, or even legal letters from your creditors threatening to sue you until you pay the amount.

When you have debts to settle, your creditors generally do not care about your financial difficulties. As a result, you can expect them to be on your neck day after day, trying to threaten you with incarceration if you don't pay their debts within the time frame they specify. While we are not advocating the legality of them threatening you, we see this much too often so it is in fact a reality. Once you file for bankruptcy, the debt collection tactics and operations will be placed on hold until you take charge of your finances.

You Do Not Have Any Savings in Your Bank Account

Most people work so hard every day to ensure that we have sufficient money in our savings or retirement accounts to meet our financial demands when we are no longer able to work. Let's assume you realize you haven't put any money into your savings for emergencies, retirement, or even for vacations. This is a good indication you're on the verge of a financial disaster.

If you currently receive a monthly salary but you have no savings, you should keep a close eye on how you are spending and handle your finances more carefully. However, as much as you may desire to save funds for your retirement, other important obligations and debts could make it difficult to save a dime.

When you have found yourself in such a scenario, it could be time to speak with a bankruptcy lawyer in your region to identify which type of bankruptcy may work best for you.

Debt payments and bills should not drain every last penny of your hard-earned earnings to the point where your retirement security is jeopardized. Consult a bankruptcy lawyer to learn how declaring bankruptcy can help you recover control of your finances.

You Have To Use a Credit Card To Pay For the Majority of Your Essential Expenses

Each one of us can have access to a credit card quickly and easily. However, if you do not properly control your expenditures and spending, it could become a serious financial issue because each purchase using your credit card increases your debts. Before buying or paying for anything with a credit card, it is a good idea to ask, "Can I make this purchase with cash and is what I am purchasing necessary?"

Before you start paying your debts and bills with a credit card, think about alternative payment options, such as cash. When you rely on a credit card to finance your living expenditures, it will ultimately reach its maximum and you'll be forced to take on more debt to pay your basic bills and household expenses.

If you have to utilize a credit card to settle the majority of your bills or expenses, your financial situation is unsustainable. Bills and other obligations could get burdensome, but you do have the alternative of declaring bankruptcy to get rid of them completely. When you file for bankruptcy, the goal will to be to receive a discharge of your credit card debts.

Your Monthly Income is Not Enough to Pay Off or Lower Your Debts

When your monthly budget, based on your earnings, cannot let you pay off your debts even if it means making partial payments, this is a bad sign as you may end up amassing more loans to cover your financial responsibilities. When this happens, you may need to file bankruptcy to discharge your obligations and stop creditors from harassing you as you strategize for your financial future.

When you have a consistent monthly wage, your bankruptcy lawyer could advise you to file for Chapter 13 bankruptcy. Without constantly being concerned about debt collection operations or harassment from the creditors, Chapter 13 bankruptcy will free you to spend your monthly salary responsibly. However, you'll have to make certain payments according to the agreed-upon repayment schedule without jeopardizing other essential bills and responsibilities.

Catastrophic Injuries or Illnesses

Accidents happen without warning and we should be equipped by securing insurance protection and consistently saving money to cover for such emergencies. If you or a close relative suffers devastating injuries as a result of a serious accident, you might have to dig into your savings to pay for the best possible care.

If you're lucky enough to have insurance that will handle some of the hospital bills, your financial losses will be minimal, however, your savings could be put at risk because you may have to pay for other unexpected expenses. Life-threatening illnesses or even injuries are issues we should be prepared for since they can occur at any moment. This can be done by putting away extra money for unforeseen incidents.

However, when you do not have any funds saved in your account or what you have isn't enough to meet these medical expenditures, you could have to utilize your credit cards. This is another tell-tale indication that you are on the verge of filing for bankruptcy.

Losing Track of Regular Payments

Your home and vehicle are important investments that you simply cannot afford by blowing your money. If you see that you are struggling to make sense of your routine payment obligations, such as a mortgage or auto loans, it will be great if you become cautious about your spending, as you may soon face foreclosure or repossession. Threats of foreclosure are indicators that your economic situation is deteriorating and the earlier you take action, the better.

Assume that no other source of financial support has helped keep you current on your mortgage and auto loan payments. In that instance, you should think about declaring bankruptcy to avert the awful prospect of foreclosure. Filing for bankruptcy will give you adequate time to cut down your expenditures and catch up on your late payments without being harassed by creditors.

You Are Not Able to Pay for Your Basic Needs

A loss of financial capabilities to purchase the items you loved or previously afforded, such as clothing, or maybe food, is a good indicator that you are on the path to going bankrupt that you must never overlook. If you realize that you aren't buying certain items as frequently as you were used to, you have to try to understand “why” since something could be going wrong with your finances.

These red flags are easy to spot, yet some individuals ignore them until it has become too late, then they discover that they do not have any other choice but to file for bankruptcy to make ends meet. If you find yourself in this situation, you should look for the best bankruptcy lawyer before choosing them to guarantee you receive the best legal counsel for declaring bankruptcy.

You Are No Longer Eligible for New Credit

You will have problems receiving additional credit when your entire debt burden is too large, as lenders will regard you as a huge risk. If you keep up with all of your key payments, such as your mortgage, but still can't get additional credit, that's because creditors don't trust you with paying them back on time. Declaring bankruptcy can give you more time to pay off your underlying bills without having to worry, and it can also help you rebuild your credit record so you can get new credit.

FREQUENTLY OCCURRING FINANCIAL EMERGENCIES

Your financial situation is unhealthy if you have regular financial crises. If you've had a previous financial crisis and are about to face another one in a short amount of time, you need to admit you're having financial issues, and that's quite normal. According to research, the ordinary American with less than a thousand dollars in savings is much more likely to suffer financial emergencies. This is particularly true when they lose their source of income as a result of factors like being laid off from work.

Setting up an emergency fund to address any situation that may arise is a vital component of maintaining your savings account. Having recurrent financial crises is a warning sign that you're on the brink of bankruptcy and you'll need legal advice on how to proceed.

BEING A GUARANTOR

When a close friend or a relative is applying for a loan and asks you to serve as their guarantor, it is advisable that you only consent if you can afford the amount if he or she defaults. Otherwise, even though you didn't use a single cent of that money, you are obligated on the terms of the agreement. Co-signing a loan for someone could leave you in a lot of debt since the lenders will demand that you pay them back if your relative or friend fails to pay the lender back. When that happens, you could have to file for bankruptcy.

FIND A BANKRUPTCY ATTORNEY NEAR ME

If you observe any of the aforementioned signs, you may be on the verge of filing for bankruptcy and it is necessary to get legal advice from a bankruptcy attorney who is familiar with the Federal Bankruptcy Code, rules of the local Bankruptcy Court, and the California Code of Civil Procedure. If you would like to seek financial relief, you can contact Modesto Bankruptcy Attorneys for professional help. We are available to serve clients in the greater Modesto area. Please call us at 209-314-3010.