Misery loves company. This expression serves to underline that major issues are almost always complex in structure, which usually causes a devastating effect. It can also be applied to situations where individuals face severe monetary problems: such factors as enormous insurance bills, unbearable loan premium amounts, redundancy, hard-to-treat diseases, and other misfortunes can harmfully affect one’s state of body, mind, and wallet, as well.

Concerning the problem of bankruptcy, studies have shown that spending more than one can afford and job loss are among the primary triggers for being broke. Let us here consider the eclectic nature of bankruptcy in detail.

Why people run bankrupt

Overall, there are five significant factors paving the road to bankruptcy. Sudden as bankruptcy usually is, it can be prevented and evaded should the factors be faced with attention and wisdom:

1. Income Loss

The most common reason for bankruptcy is income loss. More than 75% of bankrupt persons have reported living from payday to payday, which resulted in major monetary losses and, at the end of the day, bankruptcy. Besides, as you lose your job, the insurance-connected privileges are also out of the question.

2. Health-related expenditure

The cost of well-being can also drive any uninsured person into a state of bankruptcy, especially if the job loss occurred due to a medical condition that is too expensive to treat. Some private enterprises can assist individuals in maintaining their insurance while losing their jobs.

3. Loans and credits

Loans and mortgages are, too, among the top reasons for bankruptcy in the USA. On average, over 45% of Americans become jobless and bankrupt as a consequence of their inability to pay off mortgage bills. It is especially the case when individuals take up loans that are too hard to handle in the first place. Many lender companies in the USA have raised their loan application requirements to stop overspending persons from getting unaffordable loans.

4. Extravagant lifestyle

Some Americans live, as it is called, “far beyond their means” and spend immense sums of money to support their expensive lifestyles. Such behavior, paired with unreasonable purchases and usage of multiple credit cards simultaneously, often leads straight to bankruptcy. Around 40% of bankrupt individuals, as researches show, spent too much and earned too little to be able to avoid sudden bankruptcy.

5. Helping others

There are those Americans whose strong bonds with their family members won’t allow them to grow financially: roughly 30% of bankrupt individuals admitted that by helping their families, they lost considerable sums and became penniless in the aftermath.

There are also other reasons people become bankrupt in America, such as divorce repercussions and considerable student loans.

Tags: bankruptcy