Many people associate losing a job with bankruptcy. It’s easy to see, after all, how fast debt can get out of control if you no longer have a job.
The solution, most people may assume, is to search for another job and regain their stable income, thus avoiding the need for bankruptcy. Unfortunately, it is not always that easy.
Reduced income can still have a drastic impact on your financial future
One of the major reasons for bankruptcy in the United States is having a reduced income. This could mean missing out on a bonus or having your hours cut, but it could also mean switching jobs after losing yours. There’s no guarantee that the job you’re able to land is going to pay the same as the one you lost.
This can make your previously solid budget suddenly unsustainable. When you got a mortgage or took out a car loan or set up your utilities, it perfectly fit your income and seemed like a wise financial decision. But how much space is there in the budget? Getting cut back to 75% of what you earned before can suddenly make it so you have to pick and choose what to pay for.
Remember, bankruptcy is often out of your hands, and this illustrates how it happens. People may assume you made poor decisions or spent recklessly, but that’s not it at all. Even careful planning can go wrong due to things well outside of your control.
If this does happen to you, just make sure you understand all of the legal options that you have. Bankruptcy may prove to be the right way to iron out these financial issues.