Are You Prepared for an Unexpected Financial Storm?
Snow falls in Arizona February 2019.
An unexpected cold front has led to a rare snowfall in Southern Arizona this week. Areas such as Scottsdale, Goodyear, and Tucson saw the unexpected snowfall while in northern Arizona Flagstaff broke a record set in 1915 with an astounding 31 inches of snow in a single day.
Did you know that filing for bankruptcy is often unexpected as well? There is often a misconception that people file for bankruptcy because they are simply irresponsible with their budgeting and spending. The assumption that a debtor recklessly racked up their credit cards with vacations, shopping, and outlandish purchases are often furthest from the truth. Sometimes unexpected situations arise that lead to the necessity of filing for bankruptcy. Much like the weather, these “situations” come out of the blue.
A recent study conducted by Harvard University found that over spending barely breaks into the top ten reasons that lead to bankruptcy filings. At the top of the list is medical debt. According to the study, medical debts lead to over 60% of bankruptcy filings. This number also includes those who have some sort of medical insurance. Something as unexpected as a heart attack can lead to thousands upon thousands of dollars of debt.
Losing a job is another common cause of bankruptcy filings. In the housing crisis of 2008-2009, many people in the real estate industry found themselves in this situation. Many times a company will shut down expectantly resulting in many layoffs. The recent bankruptcy filings of major stores such as Toys R’ Us and Sears is an example of this. Sometimes employees will take a lesser paying position just to keep their job. However, when income drops, expenses usually do not.
When an unexpected change in income occurs, people often have to rely on their credit cards to make up the difference. This does not mean that they are irresponsibly charging. Credit cards are often used in emergency situations as well such as home or car repairs. Credit cards can be a great backup plan as long as they are used responsibly and payments are made on time.
Furthermore, another main cause of bankruptcy filings are deaths or divorces, which are also often unexpected. There are times when a spouse dies and their retirement income may stop being received by the surviving spouse. In the event of a divorce it is usually difficult to continue to pay necessary expenses on a single income. Student loans, the loss of a home or car, and a higher cost of living are also common reasons why people file for bankruptcy unexpectedly.
If you are facing unexpected debt or a financial crisis, get in touch with an Arizona debt relief expert to let you know the many options available to you.