Copyright (c) 2010 Liz Roberts

The possibility of bankruptcy is very real. If you think this could never happen to you, think again. In fact, millions of Americans have already filed bankruptcy at one point in their lives and most of them never expected that possibility either.

The truth is, everyone can be at risk of bankruptcy even those who have lots of money in the bank. Take a look at the following possible reasons why people end up filing for bankruptcy:

Unfortunate Circumstances Even rich people are affected by unexpected events that are beyond control. There are instances where a family member gets sick which can cause for their finances to slowly decrease. Natural phenomenon such as earthquake, hurricanes and accidents can happen when you least expected it.

The change in the economy or an economic crisis can bring about plenty of unwelcome events such as a loss of job, failed business, reduced income rate, unemployment, etc. Yes, all mentioned are major events in life that can have a huge impact on a person?s financial status.

Shortsightedness Knowing that the unexpected events can strike at any time, it is only fitting to do the necessary preparations. Are you saving to prepare for such emergencies? Or do you spend every penny of your monthly income, confident that you?ll have enough salary the next month? Do you have a savings fund you can rely on in case you got laid off from work or in case you got sick and unable to work for some months? Financial experts recommend having fund in your savings account which is enough to last your whole family for at least six months. This buys you some time if drastic changes in your lifestyle need to be done.

Wrong Decisions The looming possibility of divorce, gambling, reckless spending, self-destructive behavior, the lack of attention with the debts owed ? all of these actions, sooner or later lead to bankruptcy. Business owners who venture or invest on a business without knowing ins and outs of the said business sometimes causes sudden bankruptcy. These can all have been prevented if we only choose to make the right decisions. The truth is, we have control over these things and if we can only avoid it, we can lessen the chances of filing for bankruptcy.

Clearly, there is something people can do to avoid filing for bankruptcy. The first step is to be aware that bankruptcy is real and no one is exempted from it. it was on October 2005 when the New Credit Law has taken effect which requires a person who plans on filing for bankruptcy to first undergo credit counseling from a government approved agency at least six months before submitting his/her bankruptcy application.

Latest statistics show that there has been a drop in bankruptcy cases from 100,000 each month in the past years, to only 30,000 cases per month in 2006. This dramatic drop can be due to the new rules and restrictions that have been included since the Bankruptcy Abuse Prevention and Consumer Protection Act took effect.