Disclaimer: This article should not be treated as legal advice. It’s recommended that readers still consult legal counsel and contact a lawyer should they have any concerns regarding bankruptcy.
If there’s one thing that’s constant in the world of business, it’s that you never know what’s going to happen in the future. This is why business owners tend to have plans for everything, and plans always tend to set up for long-term goals. However, this doesn’t mean you should be reckless when it comes to planning, or that you should always be on the lookout. This means, however, that you should be more considerate of the various options around you and set appropriate priorities. For instance, there are key signs of bankruptcy you may not be aware of before it’s too late, and it’s important to identify these in order to avoid being in the tricky situation that is bankruptcy.
When the topic of bankruptcy is opened, there’s a particular air of dread that comes with it. The Big-B word is something businesses want to avoid, but sometimes it’s important to learn about the very thing we want to avoid in order to be able to avoid it properly. This means considering bankruptcy as an option is a good first step in order to fully understand its effects and set precautions should it pose a threat to your business.
Credit.com advises that getting a lot of debt is one of the telling signs of bankruptcy, but perhaps not knowing how to deal with them properly can create other key signs of bankruptcy you may not be aware of before it’s too late. It’s important to remember that bankruptcy not only will damage your credit score, but it can make an impact in other aspects such getting jobs or loans in the future.
If you’re already missing your payments, then this is a clear sign that you might head into a bankruptcy. If you’re slowly becoming unable to keep up with the bills you have such as mortgage, loans, credit card payments, medical bills, or auto loans, then your cash flow may inevitably lead to bankruptcy.
- Always remember to reevaluate the kind of debt you have every time you get a chance to review your current credit rating. You can get a free credit report once a year, especially if you’re in the United States, to check the kind of expenses you have. You can at least from there plot a course of action that will allow you to adjust your expenses.
- Evaluating which of your expenses are currently practical and which no longer are can save you the trouble of applying for bankruptcy if you deal with them as early as possible.
Check if there’s some form of personal setback that isn’t allowing you to recover financially. Do you have big medical bills to pay, or are you undergoing a divorce, or are you jobless? Finding out what these setbacks are and dealing with them can help you avoid bankruptcy.
- A clear sign that you might be heading towards bankruptcy is if you’re also receiving a lot of letters and phone calls from your creditors.
If you don’t qualify for a debt management plan, then you might be in big trouble. Sometimes, part of what makes debt repayments difficult is having multiple loans to pay for at the same time. It’s sometimes a good decision to be in a debt management plan as it can help you reduce payments to creditors through reforming a new debt that consolidates all the debt you have together.
- Unfortunately, if a firm for debt management checks on your budget and realizes you don’t have the money to enter their plan, you might have to file for something called a bankruptcy protection instead.
- Sometimes, home equity loans can help as you’ve decided to take on a secured debt using your house as collateral in order to pay an unsecured debt of your credit cards. This allows you to at least pay off the credit card loans and leave you with the home equity loan and a potential mortgage to handle.
- Remember, when you apply for debt management plans or other forms of consolidation loans, try to make sure they are well within your budget.
If you’re noticing that you’re turning to more loans to pay off your current loans, then you’re getting yourself into big trouble. One of the key signs of potential bankruptcy is if you’ve maxed your credit cards. If your credit cards are pushed to the limits and you can’t file for increased limits, then perhaps you should start reevaluating your finances.
- If you’re currently using your credit cards to pay for expenses such as gas, food, and utilities, then you might be in big trouble.
- The same goes if you’re suddenly choosing high-cost loans including car title loans and payday loans that often have skyrocketing interest rates. These loans, when taken hastily, can send you into a cycle of bankruptcy that doesn’t seem to end.
The key signs of bankruptcy above that you may not be aware of before it’s too late might be too specific or might be too “off” from your line of business, and this is something that can be expected. Not all businesses are the same, and therefore not all goals are the same as well.
However, it might be wise taking these into consideration and consult a legal and/or a financial professional on the matter, especially if you want to set up more effective means for you to avoid the signs of bankruptcy as stated above. It may even help to ask your legal or financial consultant to brief you on ways these signs could be interpreted to your specific business structure as this can help you create better procedures to avoid bankruptcy from happening.
Gail Wilson has more than 12 years of experience under her belt when it comes to business, which she is currently sharing with her clients and peers as part of the law industry. She writes pieces on various law topics that she hopes could help the common reader with their concerns. A family oriented, Gail loves spending time with her husband and two sons during her free time.