Getting Down To Basics with Experts

Top Reasons Why People Go Bankrupt

The term bankruptcy is not new, actually it is something people hear about multiple times. Nevertheless there are a number of people who do not understand the concept of bankruptcy. There are those who do not understand how things happen in a bankruptcy law court. In a nutshell bankruptcy is the process where a business or an individual gets the chance to repay all the debt they may be having, but under the protection of a bankruptcy court. Once someone files for bankruptcy, this usually opens their finances to public inspection. 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.

Separation and Divorce

When people divorce it doesn’t always end well financially. Going through a separation or a divorce can be quite a costly affair. It can mean that either or both partners lose a significant amount of their assets and income. It can also mean that you share your partner’s debt in a situation where you had an open joint account.
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Loss of Job
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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 can be worse if you don’t have a guarantee of restoring your financial position through a job or some other venture.

Health Expenses

Research has shown that close to 62% of the bankruptcies that occur are because of medical expenses. 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 Expenses

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. Some examples of these problems include emergency expenses, abrupt income reduction as well as illness and disability. People who struggle with poor budgeting and spending in most cases may end up experience credit debt.

Student Loans

One of the most expensive things one can do is paying for school. In the United States at least one percent of bankruptcy is as a result of students loans. This is approximately 15,000 bankruptcies a year.

Reduced 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 can bring about a huge financial strain for those employees working on other businesses and have families to take care of. Employees may then have to face bankruptcy, as an end result.

Abrupt 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.