Anyone is at risk of being bankrupt especially during these tough times. It is worth noting that the number of bankruptcy cases has been on the rise in recent years. Loss of income and poor financial decisions are among the main reasons why the number of bankruptcy cases might be on the rise. If you are concerned about securing your financial future, here are some key reasons why people file for bankruptcy and how to avoid them.
We live at a time when the rates of unemployment are at an all-time high. If you have been working for some time, losing your job can easily lead to bankruptcy. How does losing a job lead to bankruptcy? You certainly have to eat, pay rent or mortgage, meet some commuter costs, or pay for utilities. Loss of income and the desire to lead the life you were living when you had a job often leads to all manner of financial difficulties. If you are to avoid bankruptcy, you need to be flexible and adjust yourself accordingly but cutting down unnecessary expenditure.
You might not completely lose your job, but there is always a risk of income shrinkage. Losing a significant portion of your income will leave in a position where you find it difficult making ends meet. Income shrinkage is one of those developments most people have to face at some point. Therefore, it is imperative to brace yourself for such times by cutting down on your expenditure and exploring the possibility of taking side gigs.
Another huge cause of bankruptcy is divorce. When a couple decides to part ways, this decision often subjects them to lots of consequences. Divorce means that you have to split your assets and incomes, which could end up hurting your finances a great deal. Moreover, the legal services involved in a divorce proceeding can be quite costly leaving the couple in dire financial straits.
If you are faced with a medical emergency, most people are often forced to rack up their credit card debts. In some cases, these expenses lead to huge debts. As a result, individuals with huge debts are highly likely to declare themselves bankrupt.
These are just some causes of bankruptcy, but they are certainly not the only ones.