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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.





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