Causes of Bankruptcy

#1 CAuse: too much debt

Many people who are just learning more about bankruptcy may be wondering what the main causes are. The truth is that the causes that lead an individual or company to file for bankruptcy may vary widely. In the case of businesses, often they just cannot remain afloat or manage to make a profit to cover their losses. With the changing economy, this can be difficult for even previously successful businesses to maintain. A business can only last so long without making a profit before it will go under. For individuals, the causes that lead one to file for bankruptcy often vary even more greatly.

For individuals who must file for bankruptcy, not all are filing for the same reason. While most people who file for bankruptcy are usually in debt over their heads, the reasons behind that debt may vary quite widely. Some people are in debt because they cannot pay their bills. One of the most common ways to go into debt is to miss a bill and to take out a loan or cash advance to pay that bill. While the bill may be paid, the person will then have to repay the loan or advance plus interest. When the next bill arrives, the cycle may repeat itself. This usually happens until the person is so high in debt that he has no choice but to file for bankruptcy. This cycle can be prevented, but it does take close financial advising and assistance.

People can also get into trouble when they come to depend on their credit cards to pay their bills. The bills may be covered initially, but what happens when the end of the month comes and the people must pay back their credit card bills plus any other balances or interest on the cards? Some people may try to pay off one card with another, which simply results in more trouble. They may continue in this cycle until they, too, are in debt. When situations like these arise, some people may have no other alternative but to file for bankruptcy. In these situations, bankruptcy is usually initiated by the person or business in debt. However, bankruptcy can also be initiated for someone else by a person or business who is owed money.
  • History of Bankruptcy

    The word Bankruptcy comes from the Latin word “bancus,” which means a bench or a table, and “ruptus,” which means broken..
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  • Individual Bankruptcy

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  • Causes of Bankruptcy

    Most people who file for bankruptcy are usually in debt over their heads...