Filing For Bankruptcy: Five Top Reasons Why People Do It
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There is an increase in the number of people
filing for bankruptcy in the United States. For a list of the most common
reasons why people file for bankruptcy, continue reading below.
Issues
Related To Credit
Many people are prone to spending money that they
do not have, simply due to the easily available installment loans and credit
cards. Some may find themselves struggling with even making minimum payments on
such debts when they lose control of their borrowing, they may even face CCJ enforcement. Individuals who turn to these
products as solutions ultimately find themselves filing for bankruptcy, even though
a debt consolidation or home equity loan may help with managing these debts in
the short term.
Unemployment
An individual’s personal finances are likely to
be seriously affected by loss of employment. A big chunk of the people who file
for bankruptcy have lost their job and without any safety net to land on – some
people may receive a severance package, while others have an emergency fund
hidden away.
An unemployed individual’s diminishing resources
can be further strained by the cost of individual insurance after the loss of
insurance coverage. Unemployed individuals may find themselves filing for
bankruptcy, if they fall behind on their bills, because they are unable to
secure a steady income for an extended period.
Living
Beyond Your Means
Spending more money than you are earning is
guaranteed to land you into bankruptcy. This can lead to reliance on credit as
well as missed payments over time. When it comes to getting through tough
times, many people also do not have an emergency fund hidden away.
Healthcare
Expenses
Anyone can find themselves drowning in medical
related bills, as a result of serious illness or injury – which strikes
unexpectedly. Bankruptcy becomes the only way to address such debts, after home
equity, savings, retirement accounts and college funds have all been
spent.
62% of all bankruptcies are related to medical
costs, showing just how common it is for people to fall behind in their medical
expenses. To make things worse, individuals with health insurance make up the
biggest portion of those filing for medical expenses related bankruptcy.
Getting
Divorced
Divorce can be a very costly endeavor, from start
to finish. Before factoring in the cost of maintaining two separate households
as well as child support and alimony, legal fees on their own can be quite
burdening for both partners. People may struggle with their debt payments even
more when their wages are garnished in the event they are not able or not
willing to make child support or alimony payments. The recipient of these
divorce related payments can also be left in financial ruin, if they do not
receive what is stipulated.
Unexpected
Occurrences
People can be forced into bankruptcy as a result
of unexpected occurrences such as lack of emergency savings and insurance or even theft
or natural disasters including earthquakes, hurricanes and tornadoes. To
recover losses in the event of various disasters such as earthquakes, many
people may not know that they need to have special insurance cover. The cost of
replacing essential items lost during the disaster, as well as those relating
to shelter and food are shouldered by those who do not have this form of
insurance. Some individuals may even face the risk of losing their jobs, if
they are unable to dress appropriately for work after losing all their stuff in
a disaster.
