• January 29, 2023

Why Do People File for Personal Bankruptcy?

 Why Do People File for Personal Bankruptcy?

Financial distresses are inevitable. Whether you’re a working individual or a company director, debt might become overwhelming. While both concepts are more or less similar, sometimes people think they are different types of bankruptcies.

So, if you are a working individual who has recently become bankrupt, this post explains the top reasons to get insolvency services for personal bankruptcy. But before that, here’s a brief on personal insolvency.

Personal Insolvency: Why Does It Occur?

Insolvency is a state of monetary distress, and in personal insolvency, an individual becomes unable to pay off the debts and obligations. This state occurs for many reasons, which the post shall explain. Let’s dive into the post to learn further on this front:

Loss of Employment due to Resignation or Termination

Resignation, layoff, or termination – whatsoever the reason is, the loss of income may be devastating. A few people are lucky to get severance packages. However, not everyone will receive an emergency fund that easily. Most bankruptcy filers suffering from job loss may not have such options in hand.

Individual insurance expenses and loss of insurance coverage may affect an unwaged individual’s limited resources. If job hunters do not have a steady income for long, they might be unable to pay their bills. That makes them bankrupt.

Medical Costs

Severe illness or injury might lead to a significantly higher medical bill. So, from where do they pay the bills? Simply put, they pay the bills from their retirement and savings accounts. Some people even use their college education fund & home equity. Once they get exhausted, it results in bankruptcy.

People might fall behind on their healthcare bills and expenses, and it may contribute to bankruptcies. Most bankruptcy filings based on medical bills arrive from individuals having medical insurance. 

Excessive or Poor Use of Credit

Keeping track of your expense is quite essential. Otherwise, it may result in bankruptcy. People who cannot control their spending may experience difficulties with instalment debt, credit card bills, and other payments. Finally, bankruptcy occurs when the borrower cannot access funds from family and friends or obtain a debt consolidation loan.

One quick note: Most debt-consolidation plans can fail for different reasons. They usually delay filings for maximum participants. Home-equity loans might be an excellent remedy for unsecured debt in a few cases. And once it gets exhausted, negligent borrowers might experience foreclosure on their houses. That’s only when they are not able to make the payment.

So, a house equity loan (or debt consolidation plan) might help you manage debts (for the short term). However, people selecting these options may end up with bankruptcy filing.

Separation or Divorce

Another reason why you may end up filing for bankruptcy is during a time of marital dissolution. Simply put, A divorce or separation can be a costly endeavour. Marital dissolutions may create financial strains on the couple in different ways. While there are legal fees, the division of matrimonial assets is another. 

Next, if you have a child (or two), there comes the verdict for child custody and alimony. Finally, there comes the ongoing expense of keeping both separate households after the separation. What’s worse is when someone is unable to make the alimony or child payments. And if one party refuses to make payments, it leaves them in financial trouble.

Unanticipated Emergencies and Expenses

Loss of your house due to a natural disaster like a hurricane, earthquake, or tornado may force individuals into bankruptcy. Besides, loss of property by theft can also impose the same consequences. Special insurance can recoup losses in case of natural disasters such as earthquakes.

But what if you don’t have any insurance policy for such occurrences? That’s when you become bankrupt. Unexpected emergencies may be critical medical conditions, animal or insect bites, and more.

Insolvency procedures might be complex, so you need a tailored-made solution. That’s where Insolvency Australia comes into being. Seek consultation from a proficient insolvency practitioner here and achieve the outcomes. Whether you’re struggling to pay your debts or suffering from financial distress, consult Involvency Australia. 

The company comprises a skilful and adept team having professional insight into the matter. Get all-inclusive personal insolvency services and connect to bankruptcy trustees. 

Robin Williams

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