When it comes to bankruptcy, there are many misconceptions about the reasons and implications of this legal process. Many people believe that having to declare bankruptcy is more like a financial death sentence. However, the truth is, bankruptcy can be the lifeline that you need to save you from being convicted in legal cases and disputes initiated by your debt collectors. This is not to imply that it is a favorable condition that you should go seeking, but if you are a small business owner with a number of loans, or simply juggling multiple personal loans and would like to find out more information if you should ever go bankrupt, this article is for you. Below we will discuss four common causes of bankruptcy that you should know about.
01. Biting Off More Than You Could Chew
Nowadays lenient credit facilities are more tempting than ever before. It is not only banks that can lend you the money to fund your business or apply for the college of your dreams. There is an endless number of lending agencies willing to lend you the amount of money you desire for a futile interest rate. This easy access has caused many people to rush into applying for one loan after the other without paying attention to the toll this is taking on their financial status. With monthly interest rates piling up and due debts accumulating, bankruptcy seems to be the only viable option to spare them from going to jail. Bankruptcy Laws differ from one country to the other, if you live in Canada, you might want to learn more about how it works by looking for trusted sources. Look for information from governmental entities and established banks to learn how bankruptcy can help you in a similar predicament. The good news is that once you file for bankruptcy, it will be illegal for your debt-collectors to pursue you or attempt any collection calls. This alone could give you the space you need at such a distressing time so that you can think clearly and focus on getting out of bankruptcy as soon as you can.
02. Job Loss
In today’s troubled economy, job loss is perhaps one of the most common reasons why people are pushed to file for bankruptcy. Whether you are made redundant or you were fired, losing your source of stable income can mess up your whole financial situation and you will probably find that filing for bankruptcy is the most logical solution. Even if you used to live within your means and are not heavily indebted, there is still a mortgage to pay off and school fees that cannot be deferred. If you are like most average folks, your savings can only last you for so long before they completely run out. In some countries, unemployment benefits are put in place to help people stay afloat and avoid having to resort to bankruptcy, but unfortunately, this is not the case in the majority of countries around the world. When you find yourself struggling to fulfill your family’s day-to-day demands, the last thing you want is to have the possibility of going to jail burdening you further. People who lose their jobs find that declaring bankruptcy does not sound so bad after all and decide to go for it, hoping they can get back on their feet sooner than later.
If you think getting married is expensive, you clearly haven’t tried divorce! Between alimony, lawyer fees, and child support, divorce is one of the common causes of bankruptcy. When couples split up, not only do they get to share their assets, but also each other’s debt. This means that being the breadwinner of the household will not be enough reason to keep you in the clear, you will find yourself getting dragged into your ex-partner’s financial mess. It is worth mentioning though that while bankruptcy will automatically write off most of your debts, you will still be obliged to pay for child support and alimony. However, bankruptcy will help you with other debts like credit, for example, so that you can still commit to the aforementioned inevitable payments.
04. Medical Expenses
This one of the causes of bankruptcy that you can never see coming. Medical care costs a lot of money, you or your loved one can fall ill at any given day, or you might suffer a work injury or an accident that demands immediate medical intervention. Even if you have medical insurance coverage, you can still find it impossible to pay off the treatment bills while continuing to fulfill your regular financial commitments. Choosing to declare bankruptcy, in this case, is more common than you might think.
While bankruptcy might be your way out, it does come at a cost. Not everyone can afford the expenses it entails and the legalities of its application. Before being able to decide whether bankruptcy is your only choice, talk with your lawyer, and discuss possible scenarios so that you have the full picture and can make a competent decision.