Reasons Why People Become Bankrupt
Bankruptcy is a term people hear every so often especially when talking about businesses and enterprises. However, many people do not actually understand the process of bankruptcy. There are those who do not understand how things happen in a bankruptcy law court. This is usually a process whereby businesses and consumers are given the opportunity if repaying all the debt they might have under protection of a bankruptcy court. Filing for bankruptcy will always mean that one’s finance are open to scrutiny. People file for bankruptcy for various reasons and some say it can help prevent foreclosure. Some of the reasons why people may go bankrupt are discussed below.
Divorce does not always end well for either parties. Going through a divorce can be quite expensive. It can mean that either or both partners lose a significant amount of their assets and income. In some cases it may also mean that one has to share the debt of the other individual if they had an account that was joint.
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Loss of Job
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Job losses tend to quickly result to an extreme reduction in one’s savings and assets. It can also come with extra expenses, which may overwhelm your financial situation. It gets worse when there is no guarantee of when you can get another job that can take you back to the previous financial position that you enjoyed.
Research studies show that medical expenses cause 62% of personal bankruptcy. Interestingly, the myth that says that an insured people are the ones who face financial catastrophes is very wrong. According to a study done by Harvard University nearly 72% of those that have filed for bankruptcy have health insurance.
This form of debt can be brought about by a continuous pile up of problems. These problems may range from illness and disability, emergency expenses or abrupt income reduction. Those individuals who struggle with irresponsible spending and poor budgeting may find themselves experiencing credit debt.
Paying for school is probably one of the most expensive things one can do. Statistics clearly show that student loans contribute to at least one percent of bankruptcy situations in the United States. In a year this is approximately 15,000 cases.
Little or Reduced Income
Sometimes when employees experience a budget cut or a reduction of salaries they may get affected in different ways. Some employees may end up getting reduced bonuses and serious pay cuts whenever companies are cutting down expenses. This may be very hard for those people with families and businesses to finance. This may end up becoming bankruptcy.
If you are not insured you may end up spending a lot of money if you experience any unexpected catastrophe. The catastrophes maybe due to natural calamities such as earthquakes, tornadoes and floods that may cause extensive loss of property.