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Major Reasons Why People Might Go Bankrupt

Bankruptcy is not a new term, in fact it something people hear about a lot. 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. 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 file for bankruptcy for various reasons and some say it can help prevent foreclosure. Here are a few reasons why people may go bankrupt.

Separation and Divorce

When people divorce it doesn’t always end well financially. 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 a Job
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Job losses tend to quickly result to an extreme reduction in one’s savings and assets. This may also bring with it some added expenses that may be problematic in your financial situation. It can be worse if you don’t have a guarantee of restoring your financial position through a job or some other venture.

Medical Expenses

According to research 62% of bankruptcies are caused by medical expenses. Those that think insured people face more financial catastrophes are quite wrong. Harvard University carried out a study indicating that 72% of those who have filed for bankruptcy because of medical costs had some kind of health insurance.

Excess Use of Credit

This form of debt can be brought about by a continuous pile up of problems. 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

Paying for school can be very expensive for any student. Statistics clearly show that student loans contribute to at least one percent of bankruptcy situations in the United States. This approximates to 15000 cases a year.

Little or Reduced Income

Salaries sometimes go down and budget cuts also tend to affect employees. Whenever companies decide on cutting down their expenses, employees may end up suffering in terms of reduced bonuses, and 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

One may be forced to cater for unexpected expenses especially when they occur and you have no insurance. This expenses may be the loss of property due to natural calamities like floods, tornadoes and earthquakes.