With recent fluctuations in the U.S. economy, more people are struggling to make sense of their finances. Ultimately many will end up filing bankruptcy. Here are the top ten reason why they do so.
The dip in interest rates tempts many people to buy homes they cannot afford. Unfortunately they find out too late when they cannot meet the high monthly payments when adjustable interest rates start rising.
Also, most economists have warned that people who have taken out home equity lines of credit in the last ten years and have only paid interest on the loans will be facing the loans either coming due or adjusting to fixed rate installment loans. This may also lead to another wave of defaults on real estate.
Instead of holding on to older model vehicles with lower payments or no balance, some will finance pricy new vehicles, given the tempting new features that are commonly available. Struggling to meet monthly payments can put them behind on other bills, so they file bankruptcy.
Minimum Wage Hike.
Higher wages should not lead to bankruptcy, right? But higher pay normally leads to higher living expenses and can cause a person to live beyond their means. An increase in pay can be a great thing if when the pay check increases people work to live within the expenses they had when they were being paid less.
New products are mushrooming in every category. Consumers are told they must have the best of everything, so they buy, and buy, and buy some more until their budgets are wiped out. The desire to have the newest phone, car, or clothes can lead to increased debt and financial demise.
Credit Card Overload.
Credit card offers are filling mailboxes every day. Incredible offers of zero interest for the first year or bonus bucks for spending a certain amount lure the naïve spender to rack up credit card debt and max out their cards. The only alternative at that point is to file for bankruptcy.
Most people lack financial education or training. They don’t know how to manage money or live on a budget. Statistically, it is unavoidable that many will fall victim to their own economic mismanagement and end up bankrupt.
Failure to Pay Bills on Time.
Letting a bill slip by accident can happen to us all. But when it occurs frequently it can snowball into disaster for the financial stability of a family. Once default occurs and interest rates are increased and default fees are added most often an individual because unable to afford or pay the mountain of cumulative bills.
Loss of Job.
Losing a job can jeopardize anyone’s budget. Unemployment is one of the most common reasons for bankruptcy.
Disability or Medical Leave.
Becoming disabled or taking an extended medical leave can reduce income and result in unpaid bills that can lead to bankruptcy.
Cosigning a Loan.
Becoming a cosigner for someone else’s loan can backfire if the person doesn’t pay. Being stuck with that debt may overburden the budget and lead to bankruptcy. A good rule of thumb is that if you cannot afford to make the payment if your co-signer doesn’t then do not agree to co-sign the loan. It is a common misconception that a co-signer does not have the same liability on a loan as the primary signer. However, the co-signer is equally liable for the debt and in the case of default the creditor will attempt to collect it from both indivdiuals, normally focusing on the person who is the most collectible.