Bankruptcy is a process that most people want to avoid, as it comes with some very serious consequences. Not only will a Trustee have to investigate your financial affairs and potentially sell some of your assets to pay back your creditors, but you will also have a mark on your credit file and a permanent record on the National Personal Insolvency Index.

To help Australians to avoid bankruptcy, Australian Bankruptcy Services have compiled a list of red flags to look out for and situations to avoid.

1. You are maxing out on credit cards. You may also find that no one will increase your credit limits and that you can’t get approved for new credit cards. To avoid heading towards bankruptcy, limit your use of credit cards and only use them if you can actually pay off the debt. If you do receive credit card offers and limit increases, do not accept them – the more credit you have available, the more you will be tempted to use it.
2. You don’t have any emergency funds. If you are living from paycheck to paycheck and have no savings, you will have nothing to fall back on if an emergency occurs. This could be a sign that you are overspending, and will result in you using more credit when the unexpected happens. To more efficiently manage your money, set a budget and savings goal and stick to them.
3. You have a foreclosure on your home or your car has been repossessed. If your secured assets are being repossessed, this is a definite sign that you are in serious financial strife. If you can’t comfortably afford your secured loan repayments, you need to consider giving them up before the situation becomes dire. Steer clear of making high-risk investments where the return is uncertain – particularly when you are low on funds.
4. A situation that has often led people into bankruptcy, one that is not often considered, is if you have co-signed a loan for someone else. If the individual who has taken out the loan defaults on the payments, then you will be held fully responsible by the lender. Trusting that the other party will be able to maintain the loan has resulted in many people becoming liable for the debt, harming their credit standing and often resulting in bankruptcy.

If you find yourself in a dire financial situation and believe filing for bankruptcy is your only option, the professional team at Australian Bankruptcy Services can provide you with expert advice and a comprehensive bankruptcy assessment.

As industry leaders, ABS pride ourselves on our many years of service in assisting everyday Australians with bankruptcy. If any of the above have raised a red flag for you, give us a call today on our toll-free line at 1800 462 767 and speak to one of our professional team members.