Consumer bankruptcy can strike any consumer at any time sometimes due to financial mismanagement and poor decision-making but other times through no fault of their own. Personal bankruptcy should always be considered an avenue of last resort due to the serious and long-term implications of the individuals financial health. If however consumer bankruptcy is unavoidable, it is important to recognize the warning signs as they may be helpful in avoiding serious financial repercussions.
Most individuals are hard working responsible consumers who sometimes get in over their heads and look to consumer bankruptcy as a means to get out from overwhelming debt. It is a very small percentage of the population who feels that it is unimportant to repay their financial obligations and will look to bankruptcy as a simple solution. Most consumers however feel a moral and ethical responsibility to repay debt and will try most other means such as credit counseling and debt consolidation prior to seeking bankruptcy as a resolution. During tough economic times staggering amounts of debt can accrue in a relatively short period. When a consumer who has always been financially responsible loses a job or develops a medical condition living day to day can become a struggle. Often these individuals have no other alternative but to pay for day-to-day living expenses such as food and utilities with credit cards or dipping into retirement accounts. Once credit cards are maxed out and retirement accounts fully depleted there is often no other recourse but to file for bankruptcy.
Another common cause of consumer bankruptcy results from divorce. It is often the case that when a marriage dissolves current financial obligations including all debts are attributable to both parties. This joint responsibility can lead to one individual racking up tens of thousands of dollars in credit card debt and upon dissolution of the marriage both parties are responsible to creditors. A divorce decree normally outlines the dissolution of assets as well as various financial obligations including alimony, child support and debt. All it does is specify who gets what and who is responsible for what but that doesn't mean it's going to happen. So if one party fails to make payment on outstanding debt the other party can go to court to seek relief but that doesn't mean it will either be timely or effective. With creditors breathing down the other persons neck it may result in one or both individuals filing for bankruptcy.
These are only a few of the causes of consumer bankruptcy but they are the most common. The key is that any individual at any time could fall victim to a bad divorce, loss of employment or contracting a terminal illness. No one can anticipate the source of significant personal setbacks which is why consumer bankruptcy laws were created. Consumer bankruptcy gives individuals who have no other options a fresh start. While personal bankruptcy is often frowned upon in the eyes of others, it can often be a godsend to consumers with no hope and no other alternatives.