The 15% Rule: How to Tell When Your Finances Have Become Unmanageable

Rarely does bankruptcy simply “sneak up” on you; there are usually signs along the way to indicate that your financial ship may be sinking. One of the major rules of thumb is referred to as the 15% Rule: If you’re spending more than fifteen percent of your income to pay debts, then you’re probably on the road to financial ruin.

Other warning signs of money mismanagement include:

• Borrowing money or using credit cards to pay for small purchases or necessities – items you used to pay for with cash-- such as food, gas or utilities
• Dipping into your savings to pay bills, or lacking a savings account altogether because you simply don’t have any money to save
• Making only the minimum payment on your credit cards each month; this practice can easily lead to decades of credit card debt, all to pay off purchases whose prices have been hugely inflated by the interest rates on your cards!
• Consistently hovering at, near or over the credit limit on your cards
• Taking out a loan to help pay for an old loan, or before the previous loan has been paid off
• Habitually paying your bills late
• Feeling unsure of how much money you have in your bank accounts, or how much money you owe in debts
• Charging more to your credit cards than you make in payments each month
• "Juggling cards," a hazardous financial practice that involves using a card or a cash advance from a card to pay other cards
• Constantly receiving calls or letters from creditors or collection agencies
• Working overtime or obtaining a second job just to pay debts
• Hiding purchases and expenses from your spouse, or evading the topic of finances completely in order to avoid the inevitable argument
• Struggling with even the most simple and personal financial obligations, such as repaying loans from friends
• Living paycheck to paycheck
• Lacking a budget
• Living paycheck to paycheck, with no money set aside for taxes, retirement or even unforeseen emergencies
• Feeling embarrassed, frightened, uncomfortable or guilty regarding the topic of money

If you’re in over your head financially, you’re not alone. Bankruptcy is not the solution for everyone, but for many, it is a necessity. Don’t hesitate to seek legal help! There are people who are well qualified to guide you through this process as painlessly as possible.