There are a large number of Americans that are filing bankruptcy every year due to the economic downturn. When the real estate bubble burst back in 2007, it took about everyone down the river with it. It affected, not only the real estate market but every industry in the US was affected. It seems the only people that dodged the bullet was government employees. As the private sector continues to spiral downward out of control, the federal government is continuing to expand its grip on society. With unemployment at about 8 1/2%, it's no surprise that the number of those filing bankruptcy continues to stay close to 1.5 million a year.
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When Congress changed the bankruptcy code back in 2005, I believe they had no idea of what was around the next corner. Prior to 2005, the credit industry lobbied Congress to change the bankruptcy code because they believed that many Americans were abusing the system. If they only waited a few years, it really wouldn't have mattered. Along with bankruptcy filing, many of the same folks are facing foreclosure on their family homes. A large number of Americans got caught up buying homes they could not afford and are now losing them to foreclosure. People thought that real estate would keep going up in value and no one expected to be caught with their pants down. It was common to hear back in 2006, people saying that if they got caught in a bind, they would sell their home and take the profit to buy something smaller. Well, that story didn't work for many people.
In today's economy, no one is safe from filing bankruptcy. The signs that people should watch out for are usually right in front of their face. A quick way to figure out if you are in danger of bankruptcy is to jot down a list of all your debts and then add up all of your property and assets. If your debts exceed the value of your assets, you might be in danger of a bankruptcy filing and or foreclosure. When doing this exercise, be honest with yourself and value property at what it could be sold if liquidated. Don't put down prices of what you paid for it or what you believe it's worth.
The next danger zone of a person doomed to filing bankruptcy is when their expenses are more than their income. This is an easy one to figure out by just creating a budget by writing down all of the expenses you incur every month. After adding up your electric bill, rent or mortgage, insurance, automobile expenses and all credit payments, deduct your net pay, not your gross. If the number is higher than what the net pay is, you are probably borrowing yourself into a bankruptcy filing.
Another sign of being in dire financial trouble is if one or both of the two above are happening and you have no savings account at all. Having no liquidity or cushion can send a person quickly into Chapter 7 bankruptcy because all it takes is one small incident that makes the wheels fall off.
When all of this is happening the biggest sign that bankruptcy might be around the bend is denying that all this is happening. Many Americans think they're not in trouble because they believe their job is stable and they are getting by making all their payments on time. Many of these same folks are using credit to pay their living expenses and going further in debt at the same time. Denial is the most dangerous one of all, because this person isn't accepting that filing bankruptcy is anywhere in their future. These people refuse to seek the advice of a bankruptcy attorney and usually have to hit rock bottom before they realize that bankruptcy is their only way out.
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