No matter how you look at it, bankruptcy is not fun. Besides you being unable to pay your debts, if you go bankrupt you could place others in a precarious financial position by denying them the money you owe them. If you go bankrupt, it means you have let someone down. Someone who has trusted you by either giving you credit or entrusting you with a loan. You can, of course, be forced into bankruptcy by an unpaid creditor, when you have a lot of money owing to you but can’t get the money out of your debtors. This is why you have to pay strict attention to your receivables when in business and ensure that your cash flow is never restricted.
Here are 10 examples of how easy it can be to go bankrupt:
- Paying existing debt by taking on further debt. This is one of the most common causes of bankruptcy especially with credit card debt. You find you are having trouble clearing your credit card debt and the interest is crippling, so you take out another credit card to pay off the first. This is the start of your troubles as it will not be long before it all catches up with you.
- Enjoying life like there was no tomorrow. Why save money when you can have a ball every day. You are earning good money; you’ll get paid again next week so live it up. OK, but what happens if the job is suddenly lost, you become injured or ill? You didn’t bother with insurance as that costs money you could be spending on having fun. Who pays the rent with no money coming in? What about the high priced sports car you have on a personal loan? Your credit cards? The truth is nobody will pay for it but you, and if you haven’t got any savings put aside, it looks like bankruptcy could be looming.
- Live for sales. You like having the latest of all models no matter if it’s clothing, garden ware, household furniture, TV’s or computers. If a sale comes up and things are selling for half price, you can’t resist the chance to save. What about everything you already have? How many computers do you need? Why a TV in every room? By all means sell your surplus on eBay at half price but the time of reckoning will certainly come.
- Buying new cars. New cars are nice, all the latest gadgetry. But there is no need to upgrade when the car you have is only two years old. You lose a lot when buying a new car and if you make it a habit that lot becomes a mountain. You don’t need to impress your friends. If you feel you do they are not really friends anyway so ditch them.
- Buying shares with borrowed money. You hear about a new product coming on the market that is a sure fire winner. You have no money of your own to invest so you convince yourself that borrowing to buy shares in the company will more than double your money in no time. The company collapses and you go with it.
- Gambling. There are so many ways to make money gambling. All you need is a bit of luck. There is horse racing, poker machines, a regular date at the casino. What could go wrong? The world is full of people now living on the streets, homeless, who once thought the same way.
- Credit cards. The more credit cards you have the more money you think you have. Suddenly you have $100,000 at your disposal from half a dozen cards. This is particularly attractive if you find yourself suddenly out of work. Credit card companies are not necessarily friends however, and the day of reckoning will arrive when you have to pay back all the money loaned. No excuses will be accepted for not paying.
- Lending money to friends. What are friends for if you can’t lend them money when they need it? Just see how long they remain friends if the project they borrowed the money for falls over and they can’t pay you back. You’ll see less and less of them until you don’t get to see them at all nor your money. Your friends are not like that? Try lending large amounts of money and then find out.
- Materialistic love. ‘Everybody at school has an iPhone.’ ‘I want an entertainment unit like Mary’s.’ It might not be so bad if these two requests didn’t come from your six year olds. Give them all they want and they will want more. Yes it is true; kids have been known to bankrupt doting parents who want nothing more than them keeping up with the richest kids at school.
One loan after another. You’ve found it easy to get a loan because you have a good credit history so why not borrow a bit more. A bit more for some new furniture, then there is a new car as the old one is getting a bit scrubby. Don’t stop there. Take the family overseas for their vacation. In time everything catches up with you. It particularly hits home as you walk from the bankruptcy court.