With bankruptcy increasing at a disturbing rate over the past few decades, it is important for you to know potential pitfalls that might lead you to falling prey to it too. People often overlook alarming issues that can leave them insolvent; listed below are some of the most common reasons that lead to one having to file for bankruptcy.
1) Unemployment
Unemployment resulting from termination, resignation, or layoff results in loss of income. This could prove equally disastrous as most people are not fortunate enough to receive dismissal packages, neither are they given proper notice. With little or no income in hand for daily transactions and emergencies, the situation only worsens; piling up credit card bills to pay will only result in the consequences worsening.
2) Excessive Spending
The urge to spend is often irrepressible in some people – be it shopping, payments on car loans, credit card bills – they just don’t stop, piling up stupendous debts which they are unable to pay back. Further, if they lack access to funds from other sources like debt consolidation loans or friends/family- a bankruptcy declaration is the only solution they have.
3) Divorce
Marriage termination brings about major financial burden for both partners-ranging from the legal fees (that can be sky rocketing), division of the couple’s assets, verdict on alimony, to the chronic costs of maintaining two separate households after separation. The legal costs single handedly can force most people into filing for bankruptcy, whereas paying for child support and other household expenses just furthers the distress. Spouses who are not able to pay the agreed child support and alimony often leave the other partners destitute too.
4) Unforeseen Losses
Events like theft, natural disasters, death, or other unexpected ones may result in loss of property and finances. As these situations are unanticipated, they are not usually covered in a normal bankruptcy claim. Most people do not know that these events need to be separately insured for insurance companies to reimburse the resulting losses. These losses, if not insured, have to paid for by the bearer himself, which may not be possible.
Do be mindful of the above mentioned financial pitfalls as possible indicators of bankruptcy. You might want to obtain personalized credit counsel from qualified professionals at GTA credit to work out comprehensive credit management plans for you.
