Why sudden job losses put people at risk of bankruptcy
Most people are rather flippant about the prospect of losing a job. They assume that they can just find another position elsewhere and will bounce back quickly. Unfortunately, job loss is often a more serious issue than people realize.
Those who do their jobs well may only lose their job during the mass termination or layoff, which could mean that there is a glut of workers out looking for employment alongside highly qualified fellow applicants. Not only will there be more competition for any nearby open positions, but businesses that are hiring may offer lower wages because they know people are desperate.
Especially when someone has a relatively successful career, the sudden loss of their job could put them at elevated risk of personal bankruptcy. Why do some people end up filing for bankruptcy after losing their jobs?
They may have too much debt to manage
Working up a new budget is an important move after losing one’s primary stream of income. Even making the minimum monthly payment on certain accounts could be prohibitive when people owe tens of thousands of dollars on credit card debt and have a multi-hundred-dollar car payment each month in addition to their mortgage and utility bills.
Even successful professionals typically only have enough money in savings to cover their cost-of-living expenses for a month or two. When they can’t find a job that offers comparable pay, they may find themselves unable to pay their bills at all in facing foreclosure, repossession or lawsuits from creditors. More successful professionals typically tend to have higher amounts of personal debt in addition to needing to be more selective about the jobs they take after losing a position.
How bankruptcy helps
For professionals trying to regain financial control after losing their jobs, bankruptcy can be a powerful form of help. They can temporarily delay foreclosure and repossession with an automatic stay and prevent creditor lawsuits from leading to a judgment that might result in wage garnishment later.
The discharge of unsecured debts, like medical bills and credit card balances, will help someone rework their budget and potentially keep making payments even if they have minimal savings or reduced household income.
There isn’t any shame in pursuing bankruptcy because of a job loss, as career setbacks are often outside of the control of the affected individual. Learning more about personal bankruptcy can help those who are trying to manage their finances despite a recent loss of employment.