Bankruptcy doesn't just happen when you buy a house that's too big and a luxury car that you can't afford. It's not just a product of poor financial choices, as people assume all too often.
So, why does bankruptcy strike? Below are five common reasons:
1. Medical bills
You're likely going to take on whatever medical bills you need to get the treatment that is required, whether or not they're affordable. These can come out of nowhere.
2. Losing a job
No job is guaranteed to be stable. When your company downsizes, your debt can suddenly far exceed your income. Some people also face bankruptcy just because their hours are cut or they're forced to take part-time positions.
3. Unexpected bills
Unexpected expenses extend beyond medical bills. Things like car accidents and storms can cause incredible amounts of costly damage in no time.
4. Splitting up
Divorce is expensive. You may also lose assets to your spouse. You certainly lose one income stream if you both worked. All of these hits coming at once can make a mess out of your finances.
Filing for bankruptcy will put an automatic stay on your foreclosure case. A lot of people use this tactic to stall the foreclosure, buying time to try to figure everything out. Roughly one out of every 100 bankruptcy filings is related to foreclosure.
Are you considering bankruptcy? Despite the negative connotations it sometimes carries, you can see how it's actually out of your hands in many cases. Be sure that you understand how it can be a useful tool moving forward.
Source: Huffington Post, "Top 10 Reasons People Go Bankrupt," accessed Aug. 18, 2017