The term bankruptcy means a process where people who cannot meet their debt obligations, willingly or through a court order, give up their assets and the control of their finances in order to be protected from any legal action that may be taken by their creditors. Bankruptcy can happen to anyone. It is not limited to any group of persons, race or religion.
So many people who were ordinarily seen as prosperous can one day end up declaring bankrupt. This is a clear indication that bankruptcy doesn’t happen to lazy people or careless people only as many may have thought. It may happen because of many unforeseen factors and after reading this article, you will understand that staying out of bankruptcy is not a matter of the amount of wealth you have amassed for yourself.
Let’s examine some of the factors that can lead to bankruptcy.
• Business failure – no entrepreneur plans to fail when they set in business. The business may be doing well in the beginning till one wrong investment or an expansion that is not well timed will derail all the good plans you had for your business. Before you know what has happened, your debts will build to the extent that creditors will start threatening to take legal actions. At this point, you will have no other option than either declaring bankruptcy or being ordered by the court to do so.
• Divorce – this is another major cause of personal bankruptcy. We all know that two are better than one and this is also evident in family finances. When a marriage falls apart, one partner leaves with either his/her financial support. There is a gap which will be left open in the finances of the family because the sources of income have reduced.
Unfortunately, even though the money has reduced, the bills may either remain the same or increase. Apart from the reduction in finances, another bad effect of divorce that may lead to bankruptcy is legal fees. When children are involved, this could include custody battles and of course the high cost of child support for the party who looses the custody battle.
• Job loss – a sudden loss of job can lead to bankruptcy. When your steady stream of income is suddenly cut short while the bills and debts remains steady, bankruptcy may be the only way out from your creditors.
• Death of a partner – some people have been forced to declare bankrupt as a result of the sudden death of their spouse. A case where a man takes care of the family finances and suddenly dies while so many debts remain unpaid, the wife may have no other option than bankruptcy.
• Lawsuits – there are some terrible lawsuits that results to a court ordering bankruptcy against one of the parties involved. Even without the court order, the settlement that one party may be asked to pay may involve selling off all his/her properties to meet the obligation.
• Medical bills – there are some surgeries that may take away your life savings and investments. This can happen for yourself or your loved ones, and as you fight to keep them alive, you will end up incurring more debts than you can handle.
Bankruptcy can happen to you or me. It doesn’t happen to people who deserve it, like we may be quick to conclude. It doesn’t happen because someone squandered all his money on useless stuff instead of paying their debts. So don’t be quick to judge someone whenever you hear that they have declared bankrupt. Learn a lesson, rather, and make sure your debts don’t grow to uncontrollable trouble spots.