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Major Reasons Why People Might Go Bankrupt The term bankruptcy is not new, actually it is something people hear about multiple times. However, many people do not actually understand the process of bankruptcy. Some do not even get how things go down in a bankruptcy court of law. 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 opens up one’s finances to public scrutiny. People may do this for a number of reasons; some even say that bankruptcy can help prevent foreclosure. Below are some reasons why people might go bankrupt. Divorce and Separation Divorce doesn’t always turn out well for both parties. Divorces and separations can be quite costly. It can mean that either or both partners lose a significant amount of their assets and income. This can also mean that one has to share the debt the partner has if at all they had a joint account at some point.
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Losing One’s Source of Income
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Losing a job can quickly result to a high reduction of one’s assets and savings. Your financial situation may become overwhelmed because of additional expenses. 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. Medical Expenses Research studies show that medical expenses cause 62% of personal bankruptcy. Those that think insured people face more financial catastrophes are quite wrong. According to a study done by Harvard University nearly 72% of those that have filed for bankruptcy have health insurance. Credit Debt When problems pile up and find yourself in a situation where you are incurring a lot of expenses you may end up experiencing this form of debt. These problems may range from illness and disability, emergency expenses or abrupt income reduction. People who struggle with poor budgeting and spending in most cases may end up experience credit debt. Student Loans Paying for school can be very expensive for any student. Statistics done in the United States show that students loans contribute to at least one percent of bankruptcy situations. This approximates to 15000 cases a year. Reduced or Little Income Sometimes when employees experience a budget cut or a reduction of salaries they may get affected in different ways. Companies are cutting down their expenses and this may result to some employees experiencing reduced bonuses, and serious pay cuts. This may be a very stressful financial situation for the employees that have families to support and businesses to take care of. Employees may then have to face bankruptcy, as an end result. Unexpected Expenses If you are not insured you may end up spending a lot of money if you experience any unexpected catastrophe. This may include things such as earthquakes, floods, and tornadoes, which may lead to the loss of a lot of property.