Filing for bankruptcy is the worst nightmare. No one files for bankruptcy willingly. Most people are forced by debt to go the bankruptcy route. When you file for bankruptcy, it means that you are unable to pay your debts and the lenders are on your neck.
To protect yourself from being sued, the safe way is to file for bankruptcy. When you file for bankruptcy, you protect yourself from lawsuits and get an opportunity to start over again. It is essential to understand what leads to bankruptcy to avoid the situation from happening to us. Here are some reasons that lead to bankruptcy:
Job Loss or Loss of Income
Losing a job or losing your source of income can lead to bankruptcy. If you already have debt, it means that you might not be able to support your lifestyle and pay the debt. You will sink into debt because you cannot be able to pay for your debt and daily living expenses.
Fortunately, it is possible to avoid bankruptcy caused by loss of income. Always make sure that you have an emergency fund of at least one-year worth of living expenses. With an emergency fund, you can take care of your bills before you get another job.
Medical Expenses
The medical cost is very high and especially in the developed world. Medical expenses happen suddenly when we least expect and they can destabilize us. It is essential to learn how to prevent this from happening.
One of the ways to avoid bankruptcy caused by medical expenses is to make sure that you take medical insurance. With good health insurance, you will be shielded from the high medical cost because the insurance will take care of the expenses.
Divorce
After a divorce, many people go bankrupt. The process of divorce can weigh you down financially because you have to pay for all the legal costs.
Apart from the legal costs, the income can be significantly reduced after a divorce. In many cases, you can take up the debt of your spouse. To avoid bankruptcy after a divorce, make sure that you sign a prenup. With the right prenup, you will protect yourself from financial problems.
Scam Investment
Many people are losing money to scam investments. It is important to make sure that you understand how the investment works so that you can put your money in the right investment. If you invest money in the wrong investment, then you are likely to lose it all and later become bankrupt.