When it comes to bankruptcy, there is both good news and bad news. In 2017, bankruptcy filings fell by 3%. Good news, right?
Having said that, there were still over 770,000 bankruptcy filings. This is something upon which we must improve.
In doing so, it’s important to examine the fundamental reasons why people end up in bankruptcy. Bankruptcy lawyers in Scottsdale have assembled the following five reasons in addition to how to avoid ending up in this dismal situation.
#1 – Job Loss
Although we are currently in a period of low unemployment, it was recently very high not too long ago. If you don’t plan correctly and fail to have a financial safe hold in place with sufficient funds, you can easily end up in bankruptcy. Things you’d have to consider in an emergency fund include food, rent, transportation, insurance, child-related expenses, and various asset expenses. Furthermore, you always want to prepare for medical expenses just to be safe.
In terms of your job, focus on being a productive employee with an amicable attitude. In addition, it’s always good to make yourself more marketable over time with additional certifications and skills.
#2 – Decreasing Income
Simply put, with less money and cash flow, the greater the chances are that you’ll end up bankrupt. While you may not be completely unemployed, a change in roles or a reduction in hours can really make it hard to stay afloat.
While this may be hard to avoid, you should prepare for this in the same way that you’d prepare for losing your job. Another option might be to pursue side gigs to augment your income.
#3 – Credit Card Debt
Credit card debt can really be a slippery slope, and if you let it get out of control, you’ll be in trouble quicker than you think. While it may be tempting to simply make the minimum monthly payments, you’ll actually just be dragging things out and losing money in interest over time.
There is a simple solution here – only purchase what you can afford and pay off your credit card every month.
#4 – Medical Expenses
It’s no surprise that one of the leading causes of bankruptcy is, in fact, medical expenses. We understand that medical treatment generally is not optional and also is quite expensive.
To avoid getting into debt because of medical expenses, focus on living a healthy life through clean eating, exercising regularly, and going for annual physician screenings.
#5 – Divorce
Divorce is one of the last major causes of bankruptcy. Outside of legal fees, which can be tremendously expensive, financial assets are not always allocated equally. If and when they are, you must consider the idea of living alone versus living with a spouse. A financial system that supported two people may not successfully support one person.
It’s important to work hard to keep your marriage healthy and strong. This can be achieved through active communication, romantic gestures, and honesty.