How do you know when you are at risk for bankruptcy?

Your failing financial health will exhibit symptoms similar to those homeowners experience when they contract the fear of foreclosure -- tightening in the household budget, shortness of cash, and a general feeling of financial malaise.

For non-homeowners the only pain missing is a mortgage interest rate adjustment which can be a real pain in the assets.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), with its new counseling requirements and stiff rules helped reduce bankruptcies by 70 percent from a record high level in 2005.

Some of the decrease was due to the end of unusually high number of bankruptcies filed to beat the deadline on the newer, tougher rules, but some of the decrease also came from the counseling requirements.

Under the new law bankruptcy hopefuls must go through counseling before and after filing. Studies repeatedly reveal smarter consumers are better, more financially stable consumers than those less endowed with financial finesse.

Unfortunately, the law was passed just as the housing market -- and the benefits of counseling -- was thrown for a loop by an inordinate number of subprime and other nontraditional mortgages poorly underwritten for those who really couldn't afford the terms.

Homeowners, homeowners cum renters facing rising rents and others who, for whatever reason, just can't financially hack it, are beginning to bang at the double doors of bankruptcy court again, according to the Association of Independent Consumer Credit Counseling Agencies (AICCCA), a national organization of nonprofit agencies that advocate for debtors, counsel consumers and provide debt management services to consumers with excessive unsecured debt.

The American Bankruptcy Institute reported in May that bankruptcy filings increased 51.3 from May in 2006.

AICCCA says of 400,000 consumers it counseled since the new law went into effect in October of 2005, more than 95 percent of them went on to file for bankruptcy.

That's often because by the time consumers make it into counseling, their potential for bankruptcy already critical.

"If consumers recognized earlier the warning signs of serious financial problems, they would have more choices for a successful solution," said David Jones, president, AICCCA.

To help, AICCCA has developed warning signs that cash flow has become anorexic. Two or more require immediate remedial action. Unless the warning signs are treated, bankruptcy may be the only cure.

• Living paycheck to paycheck. A recent survey by American Payroll Association revealed that 65 percent of Americans report living paycheck to paycheck. Losing a job or a decrease in pay could be the final straw. Only a few months separates these consumers from a financial choke hold unless a quick change can be made to raise some dough or lower debt -- or both.

• No savings cushion. The average savings rate for Americans is slim to none. If you spend more than you earn, an unexpected costly change, say a divorce, major home repair or car expense, could cause severe financial trauma.

• Not adequately insured. Some studies suggest that 50 percent of bankruptcies involve medical debt. If you can't afford the cost of an insurable incident without insurance, get insurance. If you lack insurance you also lack the wherewithal to cover sudden medical debt, home or car expenses and those other unexpected events.

• A non-mortgage debt-to-income ratio that is more than 20 percent. The Center for American Progress reports in its May Economic Snapshot that by December 2006, household debt had risen to 132.4 percent of disposable income. For those who spend more than 20 percent of the net income (take home pay) for non-mortgage debt, again, without a drastic change financial frustration is chronic.

• Making only minimum payments on credit cards. More than 40 percent of people with credit cards carry a balance. Paying only the minimum amount due means staying in debt longer and at a greater cost than is prudent. Those unable to make more than a minimum payment are at the mercy of even the slightest change in their financial condition.

The AICCCA says if you experience two or more of those early warning pangs of bankruptcy pains you can't take two payday loans and call someone in the morrow.

You need professional help with your financial matters and you need it now.

AICCCA offers such counseling referrals. Others are available from a host of agencies including National Foundation for Credit Counseling (NFCC); NeighborWorks of America; Association of Community Organizations for Reform Now (ACORN); U.S. Department Of Housing and Urban Development; and local community and social service programs.

Published: June 27, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.