Insurance

In quite a few cases, it comes as a shock to people when they are forced to file for bankruptcy. But usually, if they had followed the signs, they would have become alerted long before of their dire financial situation.

For many people, their financial decision begins to head rapidly downhill once they begin to abuse their credit cards. What does credit card abuse look like? The main symptom is one of rolling over your credit card balances while you continue to charge for items for which you don't have the cash.

Usually, you are earning enough to cover paying the minimum when the credit card bill comes due at the end of the month. If, however, you were to lose your job, you would suddenly find yourself temporarily without the income necessary to pay off the minimum balance for that month.

And, being late on a payment is where the late and over limit fee charges really start to kick in and accumulate. Of course, the longer you are out of work, the worse the situation becomes. And, when you finally do get a job, you will find out that you are so far behind in your bills that you are unable to catch up.

A second, but often unavoidable, sign that you may be headed towards bankruptcy is a catastrophic illness within the family. If you are lucky to have health insurance, the financial damage will be somewhat mitigated. But, even with health insurance, a catastrophic illness can rapidly deplete the funds of an average family forcing them to begin to use credit cards to pay for some of the medical expenses.

And once you are forced to used credit cards, as we have seen, your financial situation stands a very good chance of becoming worse. The sad thing is that even with reasonably good health insurance, the deductibles on a serious illness can still wipe out the savings of most middle income families. And, if you have a poor health insurance policy, the financial devastation will simply happen much sooner.

Living paycheck to paycheck is the final warning sign that you are close to a financial meltdown. Living this way, you literally have no cushion for error. Unfortunately, for many families, this is unavoidable. They have already shaved their necessary expenses to the bone and are still barely making it. For others, however, it is simply a matter of over consumption. These families at least have a choice. But, if they continue to overspend, they are in serious danger of becoming a bankruptcy casualty themselves.