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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. However, many people do not actually understand the process of bankruptcy. Some do not even get how things go down in a bankruptcy court of law. 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. 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. Here are a few reasons why people may go bankrupt. Separation and Divorce Divorce doesn’t always turn out well for both parties. Going through a separation or a divorce can be quite a costly affair. This can mean that one or both of the divorcees loses a big amount in terms of assets. 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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Losing One’s Source of Income
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Losing a job is something that will obviously lead to lowered assets and depletion of savings. It can also come with extra expenses, which may overwhelm 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. Health Expenses Research studies show that medical expenses cause 62% of personal bankruptcy. It is very wrong to think that financial catastrophes only happen to uninsured people. 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. Credit Debt A continuous pile up of problems can result to a serious credit debt. Some examples of these problems include emergency expenses, abrupt income reduction as well as illness and disability. Those individuals who struggle with irresponsible spending and poor budgeting may find themselves experiencing credit debt. Educational Loans Paying for school can be very expensive for any student. Statistics done in the United States show that students loans contribute to at least one percent of bankruptcy situations. This is approximately 15,000 bankruptcies a year. Reduced or Little Income Sometimes when employees experience a budget cut or a reduction of salaries they may get affected in different ways. Some employees may end up getting reduced bonuses and serious pay cuts whenever companies are cutting down expenses. 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.