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What Are The Causes Of Bankruptcy And How Can You Avoid It?

Nobody prays to go bankrupt but there are instances where it is inevitable and you’ll need the best attorney to file your case. Where that happens, check out bankruptcy lawyers knoxville tn.

In this article, we will discuss why individuals and businesses end up declaring bankruptcy and how you can avoid it so you never have to experience such a financial blow.

In less than 5 minutes you should be done with this life-changing post. Ready?

What Are The Top Causes Of Bankruptcy

From my years of experience in this profession, I have realized that the following are usually the causal action for bankruptcy.

While many of them are uncontrollable, some of them are a consequence of reckless actions,. Here they are;

Divorce

People file for divorce in order to have peace of mind but the pursuit of this peace attracts huge financial strain in the form of legal fees, alimony, child support, asset division amongst others.

Medical Expenses

According to a recent study, more than 60% of the bankruptcies recorded in the US are caused by people not being able to afford to foot their medical bills even with insurance coverage.

Lay-offs, employment termination, or redundancies

Where you unexpectedly find yourself out of job with inadequate emergency funds stashed somewhere and with high debts to pay off. Bankruptcy may seem like the only shelter left for you.

Poor financial literacy

It is easy to take up credit, loans, and other forms of financing that attract interest payment to settle your obligations o fulfill your desires such as getting a new car, buying that beautiful house you saw in a boulevard across the town, and so on.

Unexpected events

There are instances where unforeseen events bring about you not having a choice other than to file for bankruptcy.

Here, you have done all that you can to keep yourself afloat even in times of trouble but some events such as earthquakes, floods, or any other extreme event can leave you praying for bankruptcy if you don’t have sufficient cover to overcome the obstacles it present.

How To Avoid Bankruptcy

These are simple practices to bolster your defense so you don’t end up filing for bankruptcy.

  • A simple act of not spending impulsively would go a long way to keep you out of avoidable bankruptcy.
  • Understand your finances and base your expenses on your earnings as a certain fraction.
  • Always expect the unexpected, save about 7 months of your household expenses in an emergency fund so you can survive cases of job loss.

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