While bankruptcy can be incredibly helpful when you have financial trouble, it is best to avoid financial difficulties completely. Filing bankruptcy can prevent you from losing more money and keep you from incurring judgments against you, but it also takes time and money, so it is far easier to take time to watch for clues that you could end up in a bad financial situation.
According to Dave Ramsey, there are some signs that may forecast a bankruptcy in your future.
You have a lot of debt
If you often buy things on credit or if you know your credit card debt is too high, this is a good indicator that you could be heading for trouble. Once your credit card balances get so high, it can be next to impossible to ever pay them off, and if you cannot stop yourself from using credit, it is often a slippery slope to falling behind on payments and facing collection action.
You do not use a budget
Good financial health requires using a budget so that you know exactly what you have coming and going out. A budget lets you identify problems early so that you can handle them quickly. If you simply spend money without regard to your obligations, it will not take long for you to experience financial difficulties.
You do not have an emergency fund
Nobody knows what the future holds. Sometimes, things happen that you could never imagine that will cause you financial trouble. If you do not have an emergency fund in place to take care of your needs should you lose your job or have a reduction in income, then you are just one step away from a situation where you could have to file for bankruptcy protection.