4 Common Causes Of Bankruptcy And How To Avoid Them
Life isn’t always so predictable, and sometimes this means facing some pretty unsavory things. Nobody wants to file for bankruptcy, but it happens more than you’d believe. There are a lot of common causes of bankruptcy, and there are a lot of ways to avoid it as well. Here are four common causes of bankruptcy and how to avoid them.
Divorce and Breakups
One very common cause of bankruptcy is divorce. This is usually because divorces aren’t always cheap or easy. A divorce may also lead to unsavory spending habits or poor money management. While you can’t always avoid getting a divorce or ending a relationship, there are a few things you can do to minimalize your chances of having to file for bankruptcy after one.
Avoiding bankruptcy after divorce sometimes means preparing well ahead of time. For some people, this means signing a prenup, and for others, it means starting to save well in advance. You may also wish to speak to a divorce lawyer on how to lessen your financial blow. For every other cause, while it’s easy to justify treating yourself after going through a divorce, it’s probably best to treat yourself a little less, at least until things have stabilized a bit.
Accidents and Big Events
It’s pretty easy to see when your financial situation is starting to get worse. Of course, this isn’t always the case, especially if you were thrown into financial disrepair by an accident or other big event. Most Americans are just one car accident away from not being able to afford their monthly housing costs.
When something big has happened to cause extra financial strain, it may be wise to hire a lawyer to help manage your next steps. Handling the situation sometimes means hiring a bankruptcy lawyer, whether you’re searching for a “bankruptcy lawyer in NJ” or some other form, it’s often a good idea to consult one as early as you can. While you may not see spending money on a lawyer as helpful, you’d be surprised at all they can do to help you avoid bankruptcy after an accident or other event.
Medical Bills
Another very common cause of bankruptcy is medical bills that just seem to pile up faster than you can pay them. Medical costs are exceptionally high, and most people don’t have the money to afford them. This is especially true if you don’t have insurance to help cover these costs.
For many, the consequence of these bills is bankruptcy. There are a few things you can do to try and avoid this though. Consider speaking with the billing department and trying to arrange a payment plan. You may also wish to take out a loan if possible with a payment plan and low interest to help pay the bills before they cause detrimental consequences. If all else fails, a crowdfunding campaign may help as well.
Overspending
Overspending may seem like a very preventable cause of bankruptcy, and it just may be. However, for some people, their spending habits stem from mental health issues that need extra help. If you’re facing bankruptcy due to overspending, there are a few things that you can do now to prevent it.
One of the best methods to prevent bankruptcy is to set a budget and stick to it at all costs. If your mental health causes you to overspend, it’s wise to budget for mental health services as well. You may also wish to sell an item before buying a new one, or just start selling items you no longer use to help pay down your debt. Having a good support system is also very beneficial for preventing bankruptcy, especially if due to overspending.
Bankruptcy is terrifying for many people, and rightly so. There are many causes of bankruptcy and it’s often easier to have that happen than you’d think. However, there are also many ways to avoid bankruptcy, even if all of them are that easy.
Sometimes the best thing that you can do to help avoid bankruptcy is to get help. This help may be in the form of mental health services if your bankruptcy is due to overspending, or it may be in the form of a bankruptcy lawyer to help you navigate your next steps. No matter the method, it’s always good to start these processes early for the best results.