There is a considerable stigma attached to people who file for bankruptcy, and as a result, many financially unstable people feel reluctant to declare bankruptcy even if such an action is in their favor.
Bankruptcy is an incredibly useful financial tool that can save your debilitating financial situation from aggravating any further, but a rapid increase in bankruptcy cases reflect an alarming trend. As a result, bankruptcy lawyers like bankruptcy attorney in Toledo are one of the most sought after lawyers because they can bring a lot of know-how on the table
We have discussed here the five most valid reasons why people have to file for bankruptcy so that you do not end up declaring bankruptcy for the wrong reasons.
- Medical Expenses:
There is no doubt that medical sciences have progressed by leaps and bounds, but in parallel, they have become incredibly expensive as well. In developed countries like the United States, most of the medical expenses are covered by insurance companies. But, it has been reported by various studies that medical cost is the leading cause of most of the bankruptcies being declared in the United States.
Moreover, even those people are reported to declare bankruptcies who had medical insurances. Therefore, contrary to common belief, it means that having medical insurance will not negate your chances of getting bankrupt due to medical expenses.
- Pay cuts and layoffs:
Amid the increasing cost of everything, many companies around the world are looking to cut down their expenses to keep themselves afloat. As a result, employees working in such companies end up getting pay cuts on bonuses or even on basic income. In extreme cases, they also end up losing their jobs not because of any incompetence, but because their companies are no longer able to afford them. This sudden loss in income force people to declare bankruptcy as they feel that it is the only way out.
- Debt Servicing:
Debt can quickly mount up on you when you desire to live beyond your means and have the credit cards to service your desires. Moreover, credit accounts do not only drain because of overspending because there can be so many expenses like utilities, unforeseen injury expenses, student loans, and other routine expenses.
As a result, people end up falling in the debt trap such that they spend the whole amounts of their paychecks in debt servicing and live on credit cards. The situation gets even worse when they end up missing a debt installment, and higher interest rates are charged because eventually, they do not have any other option left than to declare bankruptcy.
- Divorce:
Divorces are messy, chaotic and can be life-altering not only due to emotional turmoil but also because of financial restructuring. The division of assets and loss of income can significantly compromise the financial situation of both spouses. Moreover, a spouse may also have to service the debt taken by his better half, and this situation gets so aggravated that a lot of people find it impossible to stay afloat after divorce, and they file for bankruptcy.
- Bad budgeting:
Budgeting has become more crucial than ever because it is a world of mass consumerism where you can easily get carried away with your spending. But, a lot of people do not realize that and end up making the wrong choices and spend recklessly so much that they have to declare bankruptcy.
Now that you understand some valid reasons to declare bankruptcy, there must be no excuse that you do not use this financial tool to your advantage.