Bankruptcy Indicators and Advices How to Avoid It
More and more Americans are experiencing bankruptcy. This happens not only to people who deliberately avoid paying their debts, but also to common citizens, such as your relatives and friends. You are also not insured against bankruptcy happening to you.
Credit cards are one of the most frequent causes leading to bankruptcy. You head to quicker to bankruptcy by making purchases with your credit card you cannot otherwise afford. It is recommended to use 30% to 40% of the credit limit you have. Maxing out your credit cards is one of the quickest ways of going bankrupt.
It is also advisable that you try to make more than the minimum required payment on the credit card balance. Otherwise, it will take more time to cover it and decrease your ability to purchase additional items.
A certain indicator that you are headed for bankruptcy is the failure to make timely payments on your credit cards, car or home loans. This means that your financial situation has worsened so you should probably seriously reassess your spending habits.
Another factor that can lead you to bankruptcy is co-signing a loan for someone else. If this person fails in the payments of the loan, you will be held responsible for it and thus may end up bankrupt.
You should also always allocate money in an emergency fund. Savings are good at times when you experience financial difficulties and thus provide you with less possibility of ending up in bankruptcy when under hardship. Medical insurance is also an important factor to help you stay away from bankruptcy, since medical bills when incurred can greatly impact your financial healthiness.
Finally, many people take loans for the financing of their university studies. They borrow money without the consideration that they may accumulate too much debt that later will be difficult to cover.
Avoiding Bankruptcy Advices
First of all you should establish a budget and strictly follow it. In order to decrease the possibility of ending in bankruptcy you should avoid the making of impulsive purchases.
Additionally, whenever it is possible use cash instead of your credit card for paying for goods and services.
Another recommendation is to make home purchases that you can afford. If you have a home equity loan try to use it only for financing items that contribute to the improvement of your home. If you decide to use your line of credit for different purposes, you should be sure that you can make the adequate payments.
Additionally, you should supply yourself with the necessary insurances. Avoid making investments that carry too much risk or have a speculative character.
Finally, co-signing a loan for someone with not so good financial reputation is something you should avoid in order not to end up in bankruptcy.
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