Red flags signaling serious financial troubles

Money can be a stressful subject for many people. Worrying about finances can keep people awake at night, ruin relationships and affect people's health. Worrying about money does not solve financial problems, however. It is their actions that count. The way that people handle their money and credit are indicators that they could have major financial problems.

Using all available credit

One of the biggest warning signs that people are in financial trouble is that they use all of the credit available to them. Those with maxed out credit cards who pay only the minimum monthly payments - or not paying at all - are headed for serious financial problems. Additionally, practices like using one credit card to pay off another credit card, using cash advances from credit cards to buy necessities like food, gasoline and medical care, paying bills like utilities and rent with credit cards and immediately charging on a card once a portion has been paid off are also signals that a person is in deep financial distress.

Debt-to-income ratio

Another signal that people are in financial trouble is that their debt loads are disproportionally high compared to their incomes. People may be charging more each month than their monthly wages, and they routinely have no money left over at the end of the month after paying bills - even after making just the minimum payments on credit card debt. This often leads to people not being able to build up a savings for use in an emergency. In some cases, people may revert to borrowing from I.R.A.s or other retirement accounts to cover their bills. Others work overtime shifts to try to make ends meet.

Not knowing the amount of debts

In many cases, people with overwhelming debts often try to ignore the problem. People may lie to friends and family members about the extent of their debts because they do not know for sure how much they owe and do not want to face it. They are unsure of the total amount of money they owe to various creditors, and really do not want to know. Without knowing the full extent of their debts, people cannot take steps to repair their finances, and it often causes further problems such as overdrawing bank accounts and bouncing checks.

If any of these warning signs indicating financial problems describes your financial behavior, you may want to consider bankruptcy as a way to reorganize your finances. Bankruptcy allows people to discharge many of their unsecured debts, such as credit card debt, and start fresh. If you have questions about how bankruptcy may help you, speak with a board-certified bankruptcy attorney.