7 Signs You Are Heading For Bankruptcy

Debt-RecoveryIdentifying the warning signs of an impending personal financial crisis is extremely important. Sometimes these signs may be the only thing keeping you from bankruptcy.

You may be headed into a serious debt problem if you’re seeing one or more of these signs:

1. Maxing out on your credit cards or charging more than you can pay off each month

The Malaysian Department of Insolvency stated that credit card debt made up 5% of all bankruptcy cases in Malaysia between 2005 and 2012. You can see other causes here.

It is important to ensure that you use credit cards prudently. The general rule of thumb is to use no more than 30% to 40% of your credit limit at any one time. This gives you flexibility in case of job loss, illness, divorce, or other threats to your income.

2. Being a guarantor of a loan

Co-signing a loan for someone else is also a common factor in many bankruptcy cases when the person you co-signed for defaults on the loan payments and you’re held responsible by the lender. There are many implications to being a guarantor. It is important for you to consider these implications before making that decision, even if the beneficiary is a family member or close friend.

3. Foreclosure and repossession of assets

When you fail to make timely payments on your car and properties, actions – including foreclosure and repossession – will be taken against you by the lender. These are clear signs that you’ve lost the grip of your financial situation.

4. Cash advances on credit cards

Falling behind on your bills? Getting cash advances from credit cards is not an answer. Most credit cards charge more than the usual interest rate for cash advances. Cash advances can cost you 5% of the withdrawal amount and on top of that you can get charged a daily interest rate. If you find yourself resorting to cash advances, you are heading towards bankruptcy faster than you can say ‘credit card’.

5. Bad credit rating

Trying to get a personal loan to manage your debts but can’t get any banks to approve the loan? You most likely have a bad credit rating. Having a bad credit rating can affect you more than you think. Ensure timely payment of your loans and bills for a clean credit report.

6. You have no contingency fund

Your bank account shouldn’t be going negative every month. If you find that you’re bouncing payments and are frequently in the red before that next paycheck, that’s a strong sign that your current money management plan isn’t working and that bankruptcy is likely on the horizon

7. You are in debt or are being sued by creditors

If you have been defaulting on your payments, you will be hounded by creditors, who may file a bankruptcy case against you. This is the final tell-tale sign of bankruptcy and it is advisable to take debt management actions before it reaches this stage.

When it comes to debt management, it is always better to prevent than to cure. If you find yourself facing insurmountable debts and are unable to get things back on track, it is best to engage debt management professionals such as Agensi Kaunseling dan Pengurusan Kredit (AKPK).  It’s time to get some relief.

Have you faced any of the warning signs above? How did you remedy it? Share your experience with us in the comments section below.


To avoid any of the signs above, it is paramount to practise prudent financial management. The first step of managing money wisely is to avoid overspending.

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