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More personal bankruptcies are filed each year in New York City than in any other city in the country. Bad financial habits can lead to New York bankruptcy. The following article is provided by our New York Bankruptcy Lawyer. What bad credit habits can lead to New York bankruptcy? |
1. Having too many credit cards – Credit cards are a great way to make purchases. In many cases it’s better to carry a credit card than to carry lots of cash when making a purchase. However, you only need one, or perhaps two credit cards. If you are carrying more than two credit cards, you increase the risk that you will actually use those cards, which can lead very quickly to too much debt, and eventually bankruptcy.
2. Carrying balances on credit cards. If you have ten credit cards but never use them you probably won’t get into serious financial trouble. But if you actually carry a balance each month on credit cards, you are paying a significant amount of interest each month. Credit card interest rates are much higher than a standard bank loan. The vast majority of people who go bankrupt in New York City have significant credit card debt.
3. Paying credit card bills and loans late – By making your credit card or loan payment late, you incur late fees and penalties, and you damage your credit rating. Late payments will remain on your credit report for up to six years. Even worse, if one creditor finds out that you are paying another creditor late, they may all start to increase the interest rate you pay on your debts. This cycle of ever higher debts and interest can very easily lead to a problem that can only be solved by filing for personal bankruptcy. To avoid bankruptcy do what you can to pay bills as soon as they arrive, and make sure they are paid by the due date.
4. Having too much debt – This is an obvious one, and too much debt is the obvious cause of every single bankruptcy. But what is too much debt? Too much debt is more debt than you can afford to pay. Ask yourself this question: If I lost my job tomorrow, how long would I be able to continue making payments on my debt? If you don’t have two or three month’s cash or investments in reserve, you may be taking on too much debt. Also, what are you borrowing for? Borrowing for a house or a car is not a problem if you can afford it, because you have something to show for your money. Borrowing to take a vacation is very dangerous, because once the vacation is over, you have nothing to show for it.
5. Co-signing someone else’s debt. There is nothing wrong with helping a friend or family member get a loan. If they can’t borrow on their own, perhaps because they just started working or are new to the country, they may ask for you to co-sign a loan for them. Remember: if they can’t pay the loan, you are liable for the entire amount of the unpaid loan, including interest. Before you co-sign a loan, find out how much the loan payments will be each month, and ask yourself this question: “If they don’t pay, can I afford to make these loan payments each month?” If you can’t afford to make the payments yourself, don’t co-sign the loan, because if they don’t pay, you are liable, and that can lead to New York bankruptcy.
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