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Studies have shown that most filed bankruptcies are caused by a few specific reasons. Unexpected 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:
1. If you are living pay day to pay day.
If you are unable to save any money after you have paid your bills, then you are very vulnerable. If your pay was interrupted for any reason, such as unemployment or illness, you would not be able to afford living without borrowing. If you are living pay day to pay day, 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
2. 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.
3. 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.
4. 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 to cut them down.
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