While many people believe that declaring bankruptcy is always a sign of financial mismanagement, this is not always the case. Misfortune and disaster can also lay low someone who had been keeping their head above the financial waters. So here are five common reasons people become insolvent and may need a bankruptcy or a consumer proposal to solve their problem:
1. Losing their job
In an “iffy” economy, unexpected job loss is an increasingly common reason for people to get into financial trouble. Along with the serious blow to their self-esteem that accompanies being downsized, they could also be put in a precarious position with a sudden drop in income. If this is compounded by their spouse loses his/her job, or being laid low by illness disaster can really strike. Suddenly they find themselves coping with bills not covered by unemployment benefits or health insurance, and begin the slippery slope of using credit to pay for everything.
2. Separation and Divorce
Not only does marital breakdown come with a high emotional toll, it can hit the pocketbook equally hard. Legal expenses can quickly mount up, especially in a contested divorce. And then living expenses are doubled as each ex-spouse sets up their own household. Everything can quickly get very expensive.
3. When Lighting Strikes
The nature of many disasters is that they come out of the blue. Your car suddenly breaks down and costs thousands to fix up. Your roof gets irreparably damaged and your insurance doesn’t cover it. No matter what the disaster is, it has to be met and savings can dry up almost overnight.
4. Retiring With Debt
In an era where fewer people have adequate pensions, more and more people are retiring with serious debt loads, and reduced income to meet the payments and little prospect of increasing that income. Or, they may go into debt helping out their children or grandchildren who find themselves in financial straits. Stats show that number of seniors filing for bankruptcy is greatly on the rise.
5. Financial Mismanagement
OK, this one has to be said. This may come as a shock, but people are human. With the modern reality of easy access to credit, anything from a shopping spree to a vacation, to a house purchase can be a mistake, although it doesn’t appear to be at the time. So people take the risk and later live to regret it.
Every one of us makes mistakes daily. This does not define us. What we do about them is what defines us.
So misspending can get people into trouble. But this is a human mistake that many of us make. They just need to learn to forgive themselves, take the necessary steps to address the situation, and then get on with their life.
However, the last paragraph is easier said than done for most people. We can help by showing what the options are for dealing with debt crisis.
If you are considering declaring bankruptcy call Richard Killen & Associates for a free assessment and a chance for a new start.