June 15, 2021

9 Signs You’re Headed for Personal Bankruptcy

9 Signs You’re Headed for Personal Bankruptcy

With so many ways to rack up debt, it’s not always easy to stay on top of your personal finances or manage your day-to-day expenses. Are you heading for personal bankruptcy? Know these 9 warning signs and get in control of your personal finances before it’s too late!

What is bankruptcy?

Bankruptcy is the process whereby an individual or company is declared legally unable to pay its debts as they fall due.

Many people are unaware that bankruptcy can actually provide serious debt relief to individuals and businesses who are struggling to stay afloat financially.

Bankruptcy can be entered into voluntarily, or an individual or company can be forced into bankruptcy by a creditor that they owe money to.

Some bankruptcy warning signs include low cash and no income, being late on bills or totally unable to pay them, increased interest rates and late fees, and calls from creditors and debt collectors.

Bankruptcy warning signs that a business could be in distress can also include the departure of key management or employees, the inability to meet lease payments and payroll, and company executives making the decision to inject personal funds into the business to help it stay afloat.

Andres Duque, personal insolvency expert explains: What is bankruptcy?
Bankruptcy is no small matter, but it's not the end of the world!

Warning Sign 1: You have started to accrue late fees.

No matter which way you spin it, late fees aren’t worth the trouble.

Paying late fees is basically throwing money away.

If you’re habitually late because you don’t have the cash flow, it’s probably a sign of a deeper problem.

Late fees are a pain, but they’re also a strong signal that you shouldn’t ignore.

If you find yourself habitually juggling payments from credit card to credit card, you need to stop and think about what you can do to prevent these fees from adding up and turning into unmanageable debt. 


Call your creditor and bank and ask for a waiver or hardship.

Warning Sign 2: You keep dreaming of a lucky day.

Sure, we all know a story about someone who won the lotto, had a big win at the horse racing, or inherited a large sum of money, but entertaining these fantasies won’t do much to improve your financial situation.

Dreams of making it big with a financial windfall might temporarily soothe the nagging doubt in your mind, but statistically speaking, it’s highly unlikely your problems will be solved with good fortune.

Planning on that Christmas bonus or tax time payout to clear up nagging debt is a poor policy, as is hoping for a gambling win or vague ideas of an inheritance coming through. 


Rid yourself of this delusion and get a plan in place to start paying your debt off instead!

Warning Sign 3: You have nothing in your savings account.

It’s simply smart financial sense to have backup money for when you need it.

Recommendations differ from having 3, 6 and even 12 months’ worth of savings stashed away in an emergency fund, but it’s safe to say that if you don’t have something tucked away for a rainy day, then chances are the rainy day has been and gone, and you’re already in the danger zone. 


Open up a bank account which is separate from your usual savings and start an emergency fund. Aim to save $1000, then contribute a regular amount each pay-check. 

Bankruptcy warning sign - no savings! (Jar with coins)
Having money saved up for emergencies can be the difference between a crisis and an inconvenience.

Warning Sign 4: You are only paying the bare minimums repayments.

We all have those months where things are a bit tight, but if you’re not able to meet your debt repayments meaningfully over a stretch of time (say 3 months), this could mean deeper issues with your cash flow or budget management.


Review your budget to see if you can cut any of your expenses to pay down debt. If not, speak to your lender to see if you can come to an arrangement to hold the interest for a period. Otherwise, find an additional source of income and dedicate this to paying down the debt. 

Warning Sign 5: Paying for basic stuff on your credit card.

This one is both a warning sign and a bad habit. If you’re just ducking down to the shops to pick up a few items for dinner and find yourself reaching for the credit card, think again.

Is this just a habit? Why not use a debit card or cash?

If your only option when buying everyday supplies is to turn to the credit card because you don’t have any cash, then it’s a sure indicator you’re on the road to personal bankruptcy.


Stop using your credit card full stop! Review your budget and allocate sufficient funds for basic necessities. 

A bankruptcy warning sign is paying for stuff on your credit card.
Do you have a bad habit of putting things on credit instead of settling the balance in cash? 

Warning Sign 6: Using your retirement savings to cover expenses.

Whilst most people’s superannuation is locked away until retirement, those who manage their own super might be tempted to dip into their retirement fund to cover mounting debts.

We can’t work our whole lives (who would want to) and we’re supposed to enjoy our twilight years.

The impact of dipping into retirement savings has a two-fold negative effect – not only do you lose your capital, but you lose compound interest, too!


Review all of your other options before taking money out of super! Don’t eat into your future because of problems today, speak to a Credit Counsellor and find out what we can do to help.

Warning Sign 7: Fighting over financial issues.

Financial stress is the number one biggest stressor in Australia – and its negative impact can unfortunately compound family and relationship dynamics, leading to further household discord.

If you find arguments springing up constantly with your spouse or other family members, you might want to consider the root cause of this problem.

Your family deserves to feel happy and secure, and so do you. 


Take action – tweak your budget and discuss financial issues with your family in a calm manner to figure out a solid course of action and tackle the core problem head on. Talking to a Credit Counsellor could also be the step you need to take, to relieve the burden of financial debt.

Warning Sign 8: You keep applying for more credit cards or personal loans when you still have debt owing.

Ever heard the adage: “Robbing Peter to pay Paul”? Well, unfortunately this is a reality for some people.

Lending law loopholes mean some lenders aren’t required to do a credit check before issuing credit – so sometimes a little too easy to get your hands on more credit while in serious debt.

If your solution to managing existing credit card debt is to seek out more credit, it means you’re in a vicious debt cycle and it’s likely a sign that you’re on the road to personal bankruptcy. 


Think about your current financial situation. Compare your income against your expenses. Does it seem reasonable that you will be able to afford more credit? If the answer is “probably not”, then you need to take action on your current debt before trying to get more credit.

Warning Sign 9: You can’t afford time off or to lose your job.

What if you get sick and your personal leave and sick days aren’t enough?

What if the company you work for goes belly up or you get retrenched? If there isn’t enough to fall back on, you risk accruing more debt than you can handle.

Interest can then spiral out of control if you’re not prepared or can’t find a job quick enough.


Set up an emergency fund, make sure you have adequate health/life insurance, and devise a back up plan for the worst-case scenario.

Bankruptcy warning sign - you cannot afford to lose your job or take time off work.
Do you have enough money to keep yourself financially afloat if you lose your job or income?

Know what you owe!

Whether it’s yourself or your company in distress, it can be hard to face up to the reality of unmanageable debt. However, without taking action - the problem simply isn’t going to be solved. Talk to Credit Counsellors Australia today and we'll help you develop a plan to manage your debt, remove the financial stress, and get you back to a healthy, happy life. The sooner you take action, the sooner you can get debt relief! Call us on 1300 003 328.

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