Avoiding debt may, for some, be as simple as identifying why insurmountable debt happens and avoiding those risk factors. However, there are some factors you can't control, even with planning.
Remember, people go into debt for different reasons. No two situations are exactly the same. That's why it's such a problem in the U.S. today. What are some of those reasons? A few of the most common ones are the following:
- The loss of a job: Many people take on affordable debt based on their income. However, if they lose their job, it's suddenly not affordable anymore.
- Emergencies: Even those who pay careful attention to how they spend their money can fall victim to emergencies. If they don't have enough in savings, they may owe money they don't have on hand. Emergencies can be major or minor, from a car problem to a cancer diagnosis.
- Poor spending habits: Not all people who get into debt have poor spending habits, but it does play a role in some cases. People just spend more than they earn, relying on credit to cover the costs.
- Debts they feel they can't avoid: Sometimes you think you do not have a choice but to go into debt. For example, an 18-year-old college freshman can't afford to pay $40,000 per year for school, so they get a student loan.
No matter why you end up facing debt and considering options like consolidation and bankruptcy, make sure you exactly what rights you have and what legal steps to take. An experienced attorney can provide guidance.