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 most common reasons why people end up filing for bankruptcy:

Unfortunate Circumstances
Even rich people are affected by unexpected events that are beyond control. There may suddenly be an illness in one of the member's of the family and their finances can slowly decline in just a matter of months or even weeks.

Natural disasters like hurricane, earthquake, and other accidents can happen at the most unexpected times. The change in the economy or the loss of job are all major events in life that can have a huge impact on a family's financial status.

Shortsightedness
Knowing that the unexpected events can strike at any time, it is only fitting to do the necessary preparations. Do you set aside some of your money in preparation 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 needs 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 can lead to bankruptcy.

Investing in a business without doing extensive research or ensuring the legality of the business can also lead to sudden bankruptcy. These can all have been prevented if we only choose to make the right decisions. We have control over these things and if these actions are avoided, the risk of bankruptcy is greatly lessened.

Clearly, there is something people can do to avoid filing for bankruptcy. The first thing would be the awareness that bankruptcy is real and that nobody is exempted from this possibility. The government has introduced the New Bankruptcy Law in October of 2005 and according to this law, any one who wishes to file for bankruptcy must first seek credit counseling from a government approved agency at least six months before filing his 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.