How Does a Person Become Bankrupt?
Some people may not have any idea about the effects of filing for bankruptcy because the nearest experience they may have is through their participation in a game of "Monopoly". While it may only be a game, its consequences are near truths as they can depict the circumstances that lead to a declaration of insolvency.
In "Monopoly", a player becomes insolvent if he or she keeps on investing money in properties without taking into consideration whether there is enough money to pay for other expenses and obligations.
Unless one makes considerable changes, every turn around the board gets the player deeper in debt while paying for the high costs of landing on other players' properties. Some of the ways to improve one's finances include investing in houses in order to earn high rental fee, or selling the non-earning properties in order to convert them into cash.
If things get worse, the player may have to resort to mortgaging some or all of the properties owned just to stay alive in the game. However, if there is no improvement in one's earning capacity, the payment of mortgage debts will only speed up the player's state of bankruptcy.
Now if a participant has had enough of the game because all he or she does is pay-off creditors and everyone else that person will simply decide to bow out of the game due to insolvency.
In the real world, you cannot simply bow out of your debts but, in fact, will have to be evaluated to determine if you are eligible for bankruptcy filing.