Bankruptcy is the last resort for those who cannot pay their debts, and people from all walks of life fall back on this legal status every day. The reason bankruptcy is a relatively common occurrence is because not everything in life is predictable and there are many ways to become financially insolvent. Read on below to find out the most prevalent reasons people become bankrupt.
Losing a Job
Often, job loss can put great strain on finances and, in some cases, lead to bankruptcy. You could lose a job for any number of reasons, but the loss of income that goes with it can be just as devastating. Without a severance package or savings built up for such an eventuality, people often resort to taking out loans to pay the bills, which can lead to unmanageable debt and bankruptcy.
Getting a Divorce or Separating
As well as being an emotionally straining experience, a divorce or separation can sometimes be quite expensive. Divorce proceedings involve lawyers who are not cheap, and the eventual outcome of a divorce will require the division of assets, decisions on child support and various other costs such as maintaining a household. All this can take its toll on the finances and can sometimes lead to bankruptcy.
Poorly Managed Finances
We live in a world where people can live beyond their means by taking out loans or overdrafts on credit cards. Unfortunately, some people fail to read the small print or actively ignore them and this can lead to debt. If a person can’t pay off their debt with a certain company, the inevitable conclusion is bankruptcy. There are, however, debt consolidation services that can simplify payments, but these usually only delay a file for bankruptcy.
In America, those without health insurance can find themselves racking up huge expenses if they are unfortunate enough to require medical treatment. Bankruptcy as a result of medical costs is common as many medical insurance plans will not cover every eventuality. Medical bills can arise from any type of treatment for ailments from disease to broken bones, and the expenses can run into the thousands depending on length and type of treatment.