Key Signs You May Be Heading For Bankruptcy And Not Even Know It
When you handle a business, you may be aware of how important it is to be in the loop of everything that’s happening to your company and how it’s affected by both internal and external forces in the market. This is why you may have a lot of meetings with stockholders, investors, your managers, and your staff. This is because it’s important to be aware of the various situations your company may need to adjust in. Part of this is knowing key signs you may be heading for bankruptcy and not even know it.
Heading for Bankruptcy Without Knowing It?
The Big-B word, “bankruptcy,” tends to unlock a whole world of worry for a lot of businesses because this is a situation a lot of businesses of course want to avoid. Unfortunately, this can also be a sensitive topic that may not be discussed entirely. However, it’s important to remember that it’s essential to be aware of what you should do in the event you may have to consider bankruptcy as that can be the first step in ensuring you save your company or your investments should the worst happen. Part of this is knowing the key signs of bankruptcy that you may not be aware.
According to Debt Consolidation, the Association of Independent Consumer Credit Counseling Agencies (AICCCA) said the median household in the United States has an income of $52,100 every year. With these statistics, one could surmise that bankruptcy should be to avoid having to have expenses that are over this amount. Unfortunately, not everyone has excellent spending and saving habits. However, this doesn’t mean that we’re automatically on our way to bankruptcy. Here are more signs to follow:
Do you have a lot of credit card debt?
The AICCCA said that given the $52,100 annual income, it’s perhaps safe that the credit card debt a household should accumulate is around 10-percent of the annual income. In this case, around $5,200 or less. Anywhere above that could potentially put a household at risk of not being able to pay their monthly credit card bills.
- This is not a safe state to be in as having a lot of credit card debt will lead to the accumulation over time of additional spending, fees, and interest. This will eventually make it harder to keep up with the credit card debt.
- Perhaps it’s a safe move to assess your earnings and cut spending on credit cards. If you can opt to go for cash, please do so, and try to cancel cards you’re not using anyway. Do the latter with caution, however, as this can potentially affect your overall credit rating.
- Credit cards in essence are there to help us manage our money by making sure we have some way to pay for something quickly by “loaning” us money we can pay later. The idea is to get us a means to buy something that costs a lot without having to carry a lot of cash. However, having to use credit cards for daily expenses like groceries and prescriptions can potentially put us in debt.
Do you have enough savings?
Another important aspect in staving off bankruptcy is to make sure we have enough money to counteract the possibility in the first place. This means being able to save enough money in order to not be threatened with the notion of bankruptcy in the first place. This is a tricky thing to practice, but at least awareness on how much your savings has now could get you set up for a better financial future.
- It’s recommended that we keep at least 3 to 6 months’ worth of expenses in a bank account dedicated for savings. This emergency savings must be enough to be able to cover expenses such as food, rent, bills, and other essentials for your daily life.
- Try to make sure you find some ways to save better in order to be able to get your savings account in order. This might seem to be a bit of an overreaction, but having this much in your bank as savings can be of great help should push come to shove.
Do you only pay the minimum?
When it comes to debt, it’s also an important factor to remember that one of the best ways to stave off bankruptcy is to avoid being in debt in the first place. However, sometimes we can’t help but take out loans on things that matter that we can’t afford. This doesn’t mean however that we can skimp on paying the amount we need to repay and to be reckless when it comes to payment.
This means trying to pay the minimum is, while it’s okay, not very recommended. This will keep you in debt for a long time. If you are capable of paying off your debt much faster, try to do so as this investment will surely pay off in the long run.
If there’s anything the above information shows, it’s that bankruptcy is not something that is easily detected. After all, there are other factors involved such as return of investment, market trends, and other internal and external factors that may have direct or an indirect effect to your company’s revenue. However, if there’s one thing that’s sure, it’s that knowing these factors now could at least help you formulate a strategy that could help you avoid heading for bankruptcy in the long run. Even if the path to “avoiding” is still unclear, you may at least now have some ways to find key signs you may be heading for bankruptcy and not even know it.
Do remember, however, that this article should not be treated as strict legal or financial advice. It’s still best to talk with a legal professional or a financial consultant about things you should watch out for specifically for your company setup as not all companies are the same and a variety of considerations may have to be considered when bankruptcy is in the picture.
This article on heading for bankruptcy without knowing it was provided by Gail Wilson. Gail 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. Family oriented, Gail loves spending time with her husband and two sons during her free time.
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.