The Dangers of Bankruptcy and Who’s at Risk


Bankruptcy is often viewed as a last resort for some people. Working hard and bringing home a good living is part of what people do best. Oftentimes, there are circumstances that are beyond a person’s control and it leaves them little to no options.

Money makes the world go around and without it, we are limited.

Additionally, we often and unconsciously allow money to define who we are.  In our society, money equals success and without it, many feel like their lives are lacking.

Money is essential when purchasing our everyday, basic needs like food and housing, but when people have freedom with their spending, lifestyles become more extravagant and expensive.  While many are able to keep up with their spending, others fall behind causing mountains of debt.

So who is at risk of having to file bankruptcy? There are many warning signs and indicators that point to a dangerous path that leads straight to the bankruptcy court. How does one know if they are at risk?

Maxing Out Credit Cards

If a person has several credit cards or cards with high balances, this can be a problem when times of financial strain occur. Those who max out their credit cards will find themselves with a higher debt to ratio and the inability to get loans as easily.

The higher a credit card balance, the more a person has to pay in interest and monthly payments. Credit card companies now require higher monthly payments and some people may find it hard to come up with the minimum.

A big warning sign of immediate danger is seeing which credit card has any money left on it to buy gas or any other necessities. When the cards are all maxed out, then it is time for an evaluation of overall debt and spending.

No Medical Insurance

Some people feel that medical insurance is an unnecessary expense. While a person may be in good health, they can never be certain when a medical disaster will strike. Not having medical coverage could rack up thousands of dollars in medical bills.

Because of the drastic amount of collections hospitals face, they usually have outside collection agencies handle their billing. These agencies can be very aggressive and can use whatever means to collect their debts, including wage garnishment.

It is a good theory to think that a family can save money by opting out of medical coverage, but it is not a very wise financial decision.

No Savings Account

Families that are living penny to penny or paycheck to paycheck are in great danger of bankruptcy. Those that have a savings account that they can fall back on, have a cushion to help thwart disasters. Having no money put aside for a rainy day and having no extra money is a problem that most people face.

When something happens, like an appliance goes out, the car breaks down, or any other event, having no savings may mean taking bill money to fix issues. Borrowing from bill money often can create a deficit that is nearly impossible to fix.

Co-Signer on A Loan

Some loan companies want co-signers in order for a transaction to go through. When a person is a co-signer that leaves them financially responsible for the debt of the party they signed for.

If the other person does not pay their bills, then the co-signer must make the full payments, or their credit is in jeopardy. If a co-signer does not have the money to pay these payments, it can negatively impact their credit and their relationship with this person. Co-signing a bill is never a wise decision.

Repossession or Foreclosure

If monthly payments are getting behind and a bank has issued a repossession or foreclosure action, this is a huge warning sign. Not having the money to meet monthly obligations is a big problem for most people. According to personal bankruptcy statistics, this problem has only gotten bigger during the economic crisis.

When a home or car is taken away, this makes a huge mark on the credit report and makes obtaining new loans next to impossible. When faced with the bank seizing their property, this is something that is an almost automatic path to the bankruptcy court.

Emotional Effects Of Bankruptcy

Debt can be prevented and managed if it is dealt with early, but sometimes debt becomes so overwhelming that many individuals have no other option than to file for bankruptcy. Bankruptcy leaves many feeling emotionally, “down on their luck.”

Life’s not over, It’s just Bankruptcy

If you have examined all of your debt resolution options, you may be facing bankruptcy as your best option.  While bankruptcy is not a good choice, for everyone in debt, it can help others get a hold of their finances (Note: Bankruptcy should not be viewed as a “clean slate” kind of option).

Unfortunately, bankruptcy often has a stigma attached, making many feel like they have failed. Additionally, people who file for bankruptcy may feel as if they have lost everything, literally and figuratively, as some may also be struggling with marital problems, health conditions, or unemployment.

Financial issues typically cause stress; according to the American Psychological Association, 8 out of 10 Americans consider money issues to be their number one stressor. Once someone has filed for bankruptcy, their stress level may be at an all-time high.

You may be suffering from Emotional Stress if…

Financial issues can lead to numerous emotional problems, often leading to physical stress, affecting one’s overall wellbeing. Some warning signs of emotional stress may include:

  • Overeating or consuming unhealthy foods or a loss of appetite
  • Frequent headaches, muscle tension, neck or back pain
  • Upset stomach (in worse cases, ulcers and other digestive issues)
  • Dry mouth
  • Chest pains
  • Difficulty falling asleep or sleeping soundly or through the night
  • Fatigue
  • A weakened immune system, frequency of colds
  • Memory issues, “scatterbrained”
  • Irritability or having a short temper
  • Anxiety or depressions

If you exhibit any emotional stress signs, it’s important that you assess your financial situation, as well as take control of your overall wellbeing. While many people in debt seek financial counseling, they fail to take care of themselves. As hard as it may be, it’s vital to take care of yourself.

Whether it means seeking professional medical help or taking up a healthy hobby, caring for your emotional wellbeing is in your control, even when your finances are not.

Money Doesn’t Buy Happiness

It’s important that someone, who has filed for bankruptcy, doesn’t dwell too long on the fact that bankruptcy was the only option. In order to get past the emotional distress of bankruptcy, it’s important to remember and know that bankruptcy may change your life, but life will go on.

Hopefully, you will learn from the experience, gain a different approach toward finances, and learn how to let go of financial stress. Remember, money can’t buy happiness. Only you can be in control of your own happiness.

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