Factors That Lead To Personal Bankruptcy
To say that personal bankruptcy is a prevalent case is an understatement. Statistics show that in the United States alone, about 1.2 million citizens filed for bankruptcy in the year 1996. This number is expected to rise continuously not only in the US but also in Australia, Canada and European countries as well.
Studies revealed that not all individuals who have filed for bankruptcy were completely incapable of repaying their debts. In fact, a large percentage of bankruptcy applicants sought bankruptcy just to get a fresh start. Thus, the increasing rate of bankruptcy cases is due to the fact that most consumers choose this option just to escape from their obligations to their creditors.
In some cases, people who have never expected to experience bankruptcy were taken by surprise. Certainly, there were warning signs that should have alerted them that they were heading for bankruptcy. But sadly, most of them chose to neglect these signs. What are the different factors that lead to personal bankruptcy? Below are the most possible reasons that can put anyone in a bankruptcy situation:
Uncontrolled use of credit cards. Credit cards are seen as a major culprit that can lead people to bankruptcy before they even realize that there’s a problem. The ease and convenience of using credit cards in purchasing almost anything in the market makes them a number one cause of debt. Ask yourself the following questions:
- Have you stopped to check on your spending habits lately?
- Do you take your credit card payment dues for granted?
- Do you tend to delay on your credit card payment?
- Do you only pay the minimum amount on your credit card bill?
Do you usually carry over a balance? - Do you maximize the use of your credit line?
- Have you been relentlessly charging all your purchases to your credit card without considering the consequences?
Gambling and substance addiction. Gambling and substance addiction are like thieves that can steal a person’s ability to think straight. Experiences prove that about 1.5 million people filed for bankruptcy as a result of losses from gambling. Unfortunately, victims of gambling and other forms of addiction do not realize the problem until the problem has gone worst. But along with financial problems, these factors also bring emotional pain and distress.
High credit card interest rates. Credit cards with variable or adjustable interest rates often start with attractively low cost but balloons up in the middle of the term. Have you checked the interest rates on your credit card or your mortgage? Take note that a variable rate is dependent on the Prime Rate in the market. As the Prime Rate increases, so will the interest rate on your credit card and mortgage.
With this in mind, it is recommended to choose a credit card or a loan with a reasonable fixed rate of interest. This way, you’ll know exactly how much your monthly payment would cost you from the start until the completion of your repayment term.
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