Cause & Effect Bankruptcy

2 Pages 614 Words

We live in a world where credit is the America way. We have developed a buy now, pay later society. In a lot of cases we end up not being able to pay for what we have purchased. When any person or business owes more money than is available for payment, a petition of bankruptcy may be filed in bankruptcy court. In the United States bankruptcy is at an all time high.
Credit becomes a problem to those who cannot control their spending. Homes, automobiles, and large appliances are often purchased through a form of credit known as installment buying. In the years before credit cards became popular, installment buying was used for a wide variety of purchasing, even of low-cost items. The customer signed a purchase agreement with a store or other seller, paid a small amount of money called a down payment, took the item home, and made monthly payments directly to the store until the cost was paid. . When a long-term loan is made to buy a house, the creditor holds a mortgage, usually a bank. A mortgage is a form of purchase agreement that enables the creditor to take possession of the house if there is default in payment. Then there are credit cards that have been very easy to get. The credit card companies often send credit cards to you without you even applying for them. After you have the card; the temptation is there to spend up to the credit limit. Most credit cards have very little payments, and very high interest rates. It is not just having one card that is the problem. It is having several of those small payments that eventually add up to one large payment. The payment is usually smaller than the interest that is accrued each month, therefore not being able to bring the principle down.
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