You’re a responsible adult who pays their taxes, mortgage, and credit card payment on time. You live by a strict budget and avoid making unnecessary purchases or taking out large lines of credit. However, you could still be at risk of having to file bankruptcy. How? Here are a number of traps that intelligent, responsible people fell into leading to having to file bankruptcy. Make sure you read all of these instances and protect yourself from falling into crippling debt.
Becoming a Co-Signer
If you are accountable to yourself and manage your finances, the odds of a family member or friend approaching you to co-sign on a loan are fairly high. While out of a feeling of duty or guilt you may feel obligated to help them obtain a loan by co-signing, you should give it some long, hard debate. Many people have gone broke in a similar situations, therefore, the best thing to do when asked to be a co-signer is to inform the person that you never co-sign as a principle. By making it about you and not them, there is less of a likelihood that there will be any hard feelings.
Taking on a Bad Business Partner
While “two heads are better than one” is a popular idiom referring to a business partnership, there are plenty of former business owners who have had to declare bankruptcy from taking on the wrong partner. A quick search on the internet will bring thousands of stories of seemingly amazing business ventures gone wrong thanks to a business partner running up debt, making bad business decisions, or even defrauding partners. If at all possible, avoid take on a partner unless absolutely necessary and they are bringing strong attributes to the table.
Going through a Divorce
Divorce is among the most common causes of bankruptcies in America. Firstly, it can be difficult to adjust to one income when you have been living off two for a long period. Additionally, the divorce proceedings themselves can have enormous costs associated with them. If you’ve recently been divorced, it’s time to make a strong budget. Additionally, by keeping things friendly with your former partner you may be able to avoid costly legal battles. If you can keep things cordial, you may be able to settle disputes and dissolve the marriage via mediation, which can be a much cheaper alternative.
Lawsuits often come out of nowhere and can be devastating to normally financially secure individuals. Being sued for an injury due to a traffic accident, your dog biting someone, or professional negligence are more common than you think and can ruin even the rosiest financial outlooks. Make sure you do a risk assessment and take out the insurance necessary to cover unforeseen events: it could end up saving you a massive amount of money in the long run.
Seek Legal Counsel
If any of the aforementioned events have caused you to take on debt that you can’t afford to pay back, filing a Texas bankruptcy may be able to remove your legal obligations to that debt. By hiring an experienced bankruptcy attorney, you’ll be ensuring that your rights are protected and increasing your chances of eliminating burdensome debt.