Whenever a person is going through financial turmoil and encounters bankruptcy, the first reason that people can surely think of is “poor financial management.” It can be one of the many reasons, but various reasons lead people towards bankruptcy. We will discuss three primary reasons.
According to leading experts and researchers, it is estimated that mammoth medical bills are caused by 62% of bankruptcies. The reason for this is that healthcare is increasing daily because of incorporating the latest state-of-the-art technology for prognosis and proper treatment. Furthermore, the population of patients is swelling daily. Because general health insurance does not cover all types of treatment – such as dentistry, orthodontics, or cosmetic surgery – it is difficult to demarcate the line, which leads to confusion. Severe or acute injuries can cost thousands of dollars in medical expenses. Such bills can easily wipe out all of your savings and, most importantly, your retirement funds.
The second reason for bankruptcy is unemployment, which tends to lead towards bankruptcy. This is true, especially when the economic cycle goes through a recessionary trend or a company starts to curb their expenses and lays off its employees by downsizing. Whether the reasons are termination, resignation, or a layoff, these factors can be traumatizing – mentally and psychologically. Losing a job can show the wrath of bankruptcy if a person does not have emergency funds to cover all of their expenses for at least six to twelve months.
Most companies are moving towards a cost-cutting strategy to manage their budgetary expenses. Consequently, and for most employees, this results in pay cuts, reduction in bonuses, or downsizing. They were subsequently leading employees towards bankruptcy.
One definitely cannot eradicate the probability of losing a job, but there are several actions that you can execute to reduce the likelihood of such odds. For instance, be a productive and valuable worker with a great attitude that your employment place does not want to lose. Not only this, but you can also add some new skills in the form of extra certifications or licenses. With time, you can improve your credentials and widen the scope of job eligibility for some other job.
Divorce is also considered a significant cause of bankruptcy. Marital dissolution creates immense financial strains for both partners in multiple ways. The first things to consider are legal fees and alimony. For some, the expenses can be astronomical. Dividing the assets, proclamation of child support, and the ongoing cost of keeping two households can be more than one can handle. Filing for divorce is an expensive proposition, even if both parties agree on their decisions.