Bankruptcy is a situation which no one wants to end up in. It is a legal proceeding in which a business or an individual can’t pay debts that they have. Here are some of the factors that lead to this state
Losing a job can be quite devastating. This is because the source of income is suddenly cut off. It is even more devastating for those who have only one source of income and they don’t have savings. All in all, this is a major cause of bankruptcy. Losing a job means losing some privileges like medical covers. This means that one has to pay for every expenditure. Some people might be lucky to be compensated, but those who are not will still have expenses yet they have no money to cover their expenses. That will eventually lead to bankruptcy.
Poor Use Of Credit
It is difficult for some people to control their spending. Impulse buyers have a tendency to end up in bankruptcy. Loan payments and credit card bills if not used when needed mostly could mess someone up financially. An individual will be used to this kind of behavior until they can no longer make minimum payments. When it gets to that point and a person can’t access funds, bankruptcy is inevitable.
Every now and then, all individuals are expected to pay for some unexpected expenses. That is why financial planning and saving is advised. There could be unforeseen events that require dishing out a lot of money. For example, unexpected calamities like earthquakes. If one hasn’t insured their property, they will use a lot of money to replace the items lost and find shelter and food. It is not cheap funding such. It is very easy to go bankrupt trying to get back on their feet.
Statistics have shown that this is one of the most common factors that lead to bankruptcy. Although medical bills help, some terminal diseases can’t be covered completely by the cover. This is because they are very expensive to treat, not to mention medication. For instance cancer, the chemotherapy sessions are quite expensive and medical appointments as well.
People in third world countries sometimes seek better treatment in developed countries because they do not have facilities in their countries. This could end up draining their bank accounts because it is expensive in the long run. Financial planning is advised so as to be able to evade bankruptcy.