Have you ever had to declare bankruptcy? If you are among the lucky people who have never had to consider this option, you might be wondering why some people need to go bankrupt. Here are 9 reasons that make a lot of sense.
1. They are struggling with heavy medical bills
Anyone can get sick or injured. As medical bills pile up, it can become more and more difficult for a sick or injured person to pay them. Many people have to declare bankruptcy because they are struggling with medical expenses.
2. They have lost their job
When someone loses their job, they can get stuck in a difficult financial situation if it takes too long before they can find new employment. In some situations, a simple pay cut can slowly but surely lead someone to a bankruptcy.
3. They have gone through a divorce
Going through a divorce or a separation is ever easy. On top of being a source of stress and frustrations, it often comes with some heavy costs. Whether or not they need to hire a divorce lawyer, people who go through divorce often have to go through bankruptcy as well.
4. They haven’t paid off their student loans
Unfortunately, many people need to go bankrupt simply because they can’t afford to pay off their student loans. It can happen if they haven’t been able to find a job, or if they are over-qualified for the job they found, and earn a low salary.
5. They have bad spending habits
Many people are simply unable to control themselves when it comes to spending their hard-earned cash. Bad spending habits, especially excessive use of credit cards, can quickly throw someone into a problematic situation. Bankruptcy can then become their only solution.
6. They don’t know how to make a realistic budget
Making a budget is important, especially when you have bad spending habits. If you are spending more money than you are earning, and if this keep happening month after month, you are going to have a problem eventually.
7. They have been hit by an unexpected event
Many people have to declare bankruptcy because of bad luck. A fire, a flood, or very strong winds can damage a house. A car can get nearly destroyed in an accident. Unexpected events can force someone to use all of their savings, and more.
8. They have poor insurance coverage
Sometimes, people who have to deal with unexpected events, whether it’s a flood, a car accident or a serious illness, get in debt because they have poor insurance coverage, or no insurance coverage at all. Heavy debts can lead to bankruptcy.
9. They didn’t have enough savings
Whether or not people have adequate insurance coverage, they can get in a difficult financial situation if they didn’t have enough savings to properly respond to an unexpected event. Making a budget and saving a certain percentage or your monthly income are good habits to acquire.