Everyone’s financial situation is different, but there are a few indicators that your finances are already in trouble or on a fast track there. Often people do not realize the seriousness of their financial situation because they are living week-to-week. It is important to take a step back and assess your financial situation to help you decide if you should have a consultation with a bankruptcy attorney.
Below are some signs that you may be in more financial trouble than you think:
- You are not sure how much you owe. If this is the case, gather all of your credit card bills and loans together, and add up the balances. You are entitled to receive a free credit report from all three credit reporting bureaus, once per year. If you can’t pay the total amount off within five years then you have a problem.
- You only pay the minimum monthly payments on your credit cards. Although credit card companies recently increased minimum monthly payments, you are not chipping away at the principal unless you pay more than the minimum. Because of the interest rates, you could make minimum payments for the rest of your life and still never completely pay off the debt.
- You use one credit card to pay off another, or you are using credit to pay your monthly expenses, such as groceries or utility bills. If you don’t have any cash left over for necessities after you pay your credit card bills, you are getting deeper in debt every week. You should not be spending more than twenty percent of your net income on credit card bills.
- You use one credit card to pay another. Although low interest or no interest credit card offers come in the mail every day, “surfing” your debt (moving the balance of one card to another card) is a sign you are carrying too much debt. Also, using cash advance checks from one card to deposit money into your checking to pay on another card is a serious sign that you are in trouble.
- Creditors are harassing you, or a creditor is suing you. Collectors are persistent and not very pleasant. Getting calls from them can increase your anxiety and even cause you to lose sleep. If you’re screening your phone calls – not answering until you know whether or not the caller is a collector – you’re in debt over your head. Furthermore, if the creditor sues, your wages can be garnished, your bank account can be frozen, or a lien can be taken against your home.
- You are dipping into your savings or your retirement to pay bills. Your “golden years” will not be golden if you have not protected the money you set aside for retirement.
- You are taking out “payday” loans or pawning your belongings to come up with cash. These practices cost you money – you pay a fee for the payday loan, and pawnbrokers do not give you full value on your belongings. Sadly, if you keep going down the same road you will not have the funds to buy the items back.
- You “float” checks, or bounce them. Check floating means you send a check to pay a bill, hoping the vendor isn’t going to cash it until your paycheck hits the bank. This is illegal in some states. If the check is cashed before your paycheck gets there you will have bounced a check and have to pay bank fees.
If you find that you are doing even half of the things listed above, you should make an appointment with a bankruptcy attorney who can help you analyze your financial situation and recommend a course of action that will help you get out of trouble. Once you have diagnosed the problem and talked to an expert, you will begin the process of regaining your financial health.