People do not really plan to file for bankruptcy. Who would want to inflict such a damaging record to his/her credit history? Surely, none of us want to have a record of bankruptcy in a credit report. Nevertheless, it can happen to anyone.
Knowing the reasons why people file for bankruptcy should give us a heads up to avoid being on the same situation.
Unfortunate Circumstances
Divorce, a serious illness with a family member, natural disasters, unexpected lost of job, failure in business- these are unfortunate circumstances that we could be facing at any time. If you are not financially prepared for such crises, bankruptcy could be your only option.
Shortsightedness
Saving for emergencies is the best way to be financially prepared. Surprisingly, many people do not have an insurance coverage or even a savings account. According to financial advisers, people short set aside enough savings to support them and their family for at least six months.
Wrong Decisions
Gambling, uncontrolled spending, substance addiction, self-destructive behavior, – these actions can eventually lead a person to bankruptcy. Needless to say, the decisions we make in our life will affect us in a good way or in bad way. It depends on whether we make the wrong or the right decision.
With regards to money matters, plunging in a business without any plans or preparations is a very risky move. We know that any type of business involves risks but if you don’t plan and prepare, the risks are even higher.
Some people who are financially well off may not feel the need to save their money. These people spend on luxuries and amusement without exercising control until they realize that they don’t have a penny to spend at all. Some people use their credit cards without considering their obligations until they found themselves stuck in big trouble.
Changes in the Bankruptcy Law
In October of 2005, the New Bankruptcy Law took effect imposing some restrictions in the bankruptcy procedure. Under this new law, a person who plans to file for bankruptcy must first undergo a credit counseling course with an agency that is accredited by the government. The credit counseling course must be taken at least 6 months prior to submitting the bankruptcy application.
If the credit counseling agency recommends other solutions aside from bankruptcy, then the borrower is advised to consider the alternative solutions rather than proceed with the filing. The bankruptcy law was amended to prevent people from resorting to bankruptcy unless it is the only possible thing to do.
