Being prepared for the unexpected is crucial, and most people do this. However, it’s rare for someone to plan for bankruptcy, as it’s associated with negative aspects, and some people believe they can’t experience it – they save and make the right financial moves. As a result, they may not take time to learn about bankruptcy. So, who needs to be informed about bankruptcy?
Here is what you need to know.
Anyone can file for bankruptcy
Bankruptcy is viewed as a consequence of reckless spending and not saving, but this is not always the case. Most of the time bankruptcy occurs due to financial hardship caused by unexpected situations, such as the loss of income and medical issues.
You may have adequate savings but lose your job and deplete it. Further, you or your loved one may become sick, leading to high medical bills that can exhaust your savings. This can push you into debt. While you may not wish for these, they can happen to anyone.
The above examples can be mostly associated with low-income individuals. So, what about high-income ones?
People with savings and assets worth thousands of dollars may also find themselves in financial hardship. Medical reasons may be one of them, especially for complex conditions. But the common factor may be divorce. The chances of someone in a contested high-asset divorce declaring bankruptcy afterward are high.
Can you avoid bankruptcy?
When you are in financial hardship, you can make changes to avoid getting to the bankruptcy level. However, at times things may be out of your control, for example, with medical bills and divorce.
Filing for bankruptcy can save you from huge debts. It will be best to obtain adequate information to make informed decisions.