Studies have shown that most filed bankruptcies are caused
by a few specific reasons. Unexpected medical bills, divorce, and unemployment
are the three biggest causes behind bankruptcy. However, these things
alone do not usually lead to bankruptcy. Usually, people who are financially
in jeopardy find themselves unable to avoid bankruptcy when these things
occur. The signs of bankruptcy, though, are usually present long before
bankruptcy actually happens. You may be vulnerable:
•If you are living paycheck to paycheck. If you are unable
to put any money aside after you have paid your bills, then you are very
vulnerable. If your paycheck were interrupted for any reason, such as
unemployment or illness, you would not be able to afford living without
borrowing. If you are living paycheck to paycheck, you would not be able
to afford any debt payments or any unexpected expenses. Debt consolidation
can help by helping you figure out where your money is going and by helping
you afford your bills.
•If you have no savings. If you have not put any money
away then any financial emergency such as unemployment or illness can
leave you without money for the basics. With no savings, you would have
to borrow in order to pay for the basics in case of an emergency, a risky
practice that can quickly lead to unaffordable debt.
•If you have no financial emergency plan. Many people
panic if they are unemployed or are faced with divorce or sudden expenses.
This can be dangerous, especially if the panic leads to non-action. Just
as you have a plan in case of a fire in your home, you should have a plan
for dealing with a sudden financial emergency. Your plan may include assets
you can liquidate to make money or extra expenses you can cut. By acting
on your plan as soon as emergency happens, you can avoid bankruptcy.
•If you have large debts. If you have lots of debts,
any emergency may make you unable to meet your debt payments, leading
to bankruptcy. Debt consolidation can help you avoid bankruptcy by making
your debt payments affordable and by helping you pay down your debts.
