Bankruptcy is something that can happen to anyone. People sometimes seem to assume that this isn’t the case. They believe that it only happens to people who have poor spending habits, for instance, or who make financial mistakes.
But when you look into some of the actual reasons for bankruptcy, you’ll find that these types of mistakes and errors are not usually the root cause. They do happen, but most people find themselves facing bankruptcy for things that are completely out of their control. A few examples are noted below.
The loss of a job
First and foremost, many people create their budget based on their projected income. They have a certain amount of debt in mortgage loans, car, loans and credit card debt. As long as they keep making money, all of this is very affordable, and they can go for years or decades without a problem. But the sudden loss of a job, or a reduction in earnings, can quickly cause their debt to spiral out of control.
Another example is that people sometimes end up facing unexpected medical costs, perhaps that are not covered by insurance. Many serious medical conditions can cost tens of thousands of dollars in treatment, and people will never be able to afford them. Even so, they are not going to forgo that treatment just because it’s expensive.
Caring for other’s needs
Finally, some people find themselves facing bankruptcy because they have had to make financial decisions in the name of caring for someone else. For example, maybe a child has an illness and a parent has to drop out of the workforce to take care of them, leading to a drastic reduction in income. Or perhaps adult children find themselves acting essentially as caretakers for their parents as they age, considering that nursing home costs are so expensive.
What are your options?
As you can see, factors outside of your control can certainly cause you to face overwhelming debt. If you find yourself in this situation, be sure you know what legal options you have.