What are the Causes of Bankruptcy?
With the impact on an individual’s credit repute, several Canadians would prefer not to think of filing for bankruptcy. Besides, filing for bankruptcy would require your time and effort, not to mention its overwhelming costs. To prevent bankruptcy, you must first acknowledge the causes of why people go bankrupt. You can avoid having bankruptcy as a getaway, once you understand where it’s rooted.
The causes of bankruptcy may be uncontrollable or unexpected; thus, knowing this will help you prepare for any shortcomings. On the contrary, some of the causes are easily manageable through the different debt relief options, including a consumer proposal and debt settlement. Usually, experiencing loads of these circumstances can compel you in filing for bankruptcy.
Money Habits and Budgeting
If you fail to efficiently manage your finances and live on your budget, you would likely owe from creditors. Poor money habits and budgeting can be a factor that will draw someone into the tailspin of bankruptcy. Although spending more than what you earn will not necessarily trigger bankruptcy, it is important that you save some funds for the rainy days.
Although overspending may not initiate or end up to bankruptcy, it will eventually lead you in seeking for debt solutions such as debt consolidation or credit counseling. Thus, living on your budget and making sure that you save extras for unexpected expenses, will help back up your finances.
There are certain things that are beyond man’s control; these are natural disasters, calamities, and catastrophes. If you are diligently saving for the future or for any circumstances that may occur, having these situations is too much to bear as it involves huge amounts to restore. You can prepare for these situations through suitable insurance that will somehow reduce the cost it will take you. On the contrary, even with the presence of good insurance, it’s not a guarantee that all your financial burden will be covered, nor will it be taken care of in full.
In Canada, residents are covered by the healthcare system of the Canadian government; however, seeking medical help beyond this system will cost a large expense. Critical illness or diseases, injuries, or any complicated medical condition will require a huge sum for treatment. These situations mostly compel people in seeking bankruptcy.
On the other hand, getting a separation and divorce can also contribute to bankruptcy. In cases where spouses have to divide conjugal assets, both parties can be in jeopardy for possible financial strain. This is evident as 10 % of the Canadians who file for bankruptcy have indicated divorced or separation.
Reduced Income or Job Loss
If your salary is too low, you must find ways to get a new job or sidelines to cope with paying for your bills and daily needs. You should take advantage of every opportunity to learn and acquire new skills as an edge to fit for new roles in the future. In contrast, if your salary is inadequate to cover your monthly expenses, you must need to acquire a second job as a counterpart.
Preventing Bankruptcy Before It Starts
If you perceive that your situations draw you closer to bankruptcy, better act early. Bankruptcy damages your credit more than you can imagine. It may even scar your credibility to potential employers and companies. To avoid the verge of bankruptcy, consider a consumer proposal or debt consolidation.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.