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Reasons Why People Become Bankrupt The term bankruptcy is not new, actually it is something people hear about multiple times. Nevertheless there are a number of people who do not understand the concept of bankruptcy. Some do not even get how things go down in a bankruptcy court of law. In a nutshell bankruptcy is the process where a business or an individual gets the chance to repay all the debt they may be having, but under the 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. Below are some reasons why people might go bankrupt. Divorce and Separation Divorce does not always end well for either parties. Divorces and separations can be quite costly. This can mean that one or both of the divorcees loses a big amount in terms of assets. This can also mean that one has to share the debt the partner has if at all they had a joint account at some point.
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Losing a Job
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Losing a job is something that will obviously lead to lowered assets and depletion of savings. Your financial situation may become overwhelmed because of additional expenses. It can be worse if you don’t have a guarantee of restoring your financial position through a job or some other venture. Expenses of Health Research studies show that medical expenses cause 62% of personal bankruptcy. Interestingly, the myth that says that an insured people are the ones who face financial catastrophes is very wrong. According to a study done by Harvard University nearly 72% of those that have filed for bankruptcy have health insurance. Credit Expenses This form of debt can be brought about by a continuous pile up of problems. These problems may range from illness and disability, emergency expenses or abrupt income reduction. People who struggle with poor budgeting and spending in most cases may end up experience credit debt. Loans by Students Paying for school is probably one of the most expensive things one can do. In the United States at least one percent of bankruptcy is as a result of students loans. This is approximately 15,000 bankruptcies a year. Little or Reduced Income Employees may end up getting affected by salaries going down or budget cuts. Companies are cutting down their expenses and this may result to some employees experiencing reduced bonuses, and serious pay cuts. This can bring about a huge financial strain for those employees working on other businesses and have families to take care of. This may end up becoming bankruptcy. Unplanned Expenses Sometimes one may experience an unexpected catastrophe that may force you to spend a lot of money especially if you are not insured. This may include things such as earthquakes, floods, and tornadoes, which may lead to the loss of a lot of property.