Who is most likely to fall into bankruptcy?

Personal debts can lead you to bankruptcy

07:00 25 January 2014

Accrued debts may very well be the bane of even the most well intentioned borrower.  Individuals borrow for a number of reasons, always with the intention to pay back the loaned amount plus the interest at the appointed time.  However, in the event of job loss or illness so that debts cannot be settled, the consequence can be quite unsettling.

Having debts may be a non-issue if you have a regular source of income such as a job, a business or even grants which will cover the monthly payments when they become due.  All you have to do is prioritise payment and live with whatever is left. However, if that financial security is suddenly taken away, then it becomes a real big problem.

If one is forced to subsist through state assistance, there will be totally nothing set aside for debt repayment.  If the debtor is an unemployed homeowner, he or she might have to give up their homes to settle their debts.

This is a prevalent practice in the UK, whereupon an individual who is dealing with bankruptcy debts and has nothing left but their homes will have to surrender the deed to their creditors.  Having no job, no money, and no home, how much worse cans anyone’s situation get.

Declaring bankruptcy is generally the last resort an individual takes when driven up against the wall by debts.  This is a serious problem both for homeowners and non-homeowner alike, only in different terms or categories.  The homeowner faces the probability of losing his home because of the inability to continue paying the mortgage.

The non-homeowner, on the other hand, suffers from perennial problems of low income, lack of emergency funds for illness or emergency repairs, escalating cost of rent, which would most likely lead them to acquiring more loans than they can afford to pay; and this may make them even more attracted towards bankruptcy.