How Close to Bankruptcy are You
According to Bankruptcy Courts in the USA, 6,705 businesses declared bankruptcy in the second quarter of 2007. This reflects an upward trend of 7 per cent from the first quarter of 2007 and a staggering 45% increase compared to the same period in 2006.
While businesses are being sucked into the bankruptcy spiral, personal debt skyrockets totally out of control. One does not have to have a Masters Degree in Economics to realize that the level of consumer spending must be curtailed if we are to reverse the trend in personal bankruptcy statistics.
The USA introduced stricter bankruptcy laws over a year ago, with the aim to reduce personal bankruptcy, unfortunately even though the law created some hurdles that were designed to reduce the level, most people quickly found ways to jump the hurdle.
We can move to the UK and be confronted with a level of debt unheard of in previous years. The current research shows the UK’s personal debt is increasing by £1 million (sterling) every 4 minutes and 77 personal properties are defaulted every day!
Bankruptcy statistics are also on the rise in Australia, with figures revealing there were a record 32,000 people who were deemed bankrupt between January and June this year — a jump of 17 per cent. Another 6500 people entered formal debt agreements with their creditors — up about 30 per cent on the previous year. Most Australians report that they can handle debt – when Credit Card debt equals over $3,000 for each and every person in Australia, something is amiss. How long can this unfavorable situation continue?
Unfortunately most people are unaware, or choose to ignore the fact that the current level of personal debt is the highest it has been for over 150 years and people are now under more financial stress than they have been at any time since the absolute peak of the Great Depression. The numbers of people being treated for depression and with suicide levels rising in all western civilizations, money and debt is reported as being a primary reason.
Bankruptcy should always be the last resort for people struggling to pay off their debts. When you file for bankruptcy, it’s going to be an indelible entry from your record for anything ranging from seven to twelve years, (most countries) depending on the type of bankruptcy you file.
Bankruptcy is considered public information so anyone who wishes to know about your bankruptcy can obtain all data and the bankruptcy can prevent you from enjoying both personal and work opportunities.
But in the end, so many still choose to file for bankruptcy and face the all-too-familiar consequences it brings.
What Causes Bankruptcy?
Medical Expenses – Health Affairs in 2005 published the results of a study that was completed in 2001, a study that pinpointed illnesses and medical bills as the most common cause of bankruptcy. It is, indeed, the reason cited in 50% of the cases of personal bankruptcies studied. This figure is not surprising, but what is surprising, or one could say, alarming, is that in most cases, those filing bankruptcy had health insurance.
While professionals like Dr. Quentin Young, who in addition to his distinguished career as a physician, has been a leader in public health policy and medical and social justice issues, has continually called for changes in the USA’s health system and continues to reinforce that ” health care remains the over-arching issue in fiscal and social policy, it remains up to private individuals to do what they can in creating emergency funds and preparing themselves financially for unexpectedly costly incidents in the future.
It is easier said than done, of course, but prosperity has always been something one worked hard for since time immemorial. People must learn increase and expand their knowledge of wealth and the correct way of utilizing wealth to enjoy exponential growth.
Loans – There are good loans and bad loans. There are also good and bad times to obtain loans, but more often than not, people choose to ignore even common sense when they apply for loans. They’re solely interested in getting the funds they need as quickly as possible and disregard the consequences in the event that they’re unable to repay the debt.
Debt consolidation may on the surface be the best solution, at first glance, but it could also make things worse if you don’t have the necessary traits to make debt consolidation work. With debt consolidation, you could get your old creditors off your back, but if you don’t change your spending habits, debt consolidation might just give you more courage to borrow even more money from new creditors.
Getting a loan is not bad, just as long as you’re borrowing the right amount with rates and terms you can afford and for the right reasons.
Spending Habits – these are a major cause many people file for bankruptcy; this dilemma is becoming like a cancer just gnawing away slowly at first, then escalating at rapid speed. The need to just keep spending on anything and everything needs to be reined in. Since when is it necessary to wear designer PJ’s when your only 10 years old? The people who end up bankrupt simply because they don’t know how to use their money wisely must learn not to place blame on society, but on themselves for allowing the love of money and possessions to control them. Step back and take a look at what you are teaching your children and grandchildren
Excessive spending will almost always lead to enormous debt and ultimately, bankruptcy. If you want to get out of debt, borrowing more money is rarely, if ever, the answer. Approaching a consumer credit counseling agency won’t work either, unless you are willing to change your spending habits.
Poor Business Decisions – Choosing the wrong businesses to manage or the wrong investment strategies for real estate and stocks and shares can also result to bankruptcy.
Making bad business decisions are unavoidable at times because let’s face it we are human and we’re not perfect, but there are many things we can do to avoid making the situation worse. Stress and anxiety can cloud the mind and cause us to make even poorer decisions. It is very possible that one can combat these with proactive solutions especially acquiring more knowledge and skills.
Bankruptcy is never desirable, work on eliminating debt, albeit slowly, before bankruptcy happens and just remember being frugal is not about being miserliness; it is, in our money-based economy, merely, economical use of money to meet all our long term personal, familial, and communal desires. It’s about being economical not wasteful.