Final answer:
Bankruptcy is often linked to the overuse and misuse of credit within the budgeting aspect of financial planning. Effective budgeting helps to prevent accumulating unsustainable debts that can lead to bankruptcy.
Step-by-step explanation:
The problem of bankruptcy is associated with overuse and misuse of credit in the budgeting component of financial planning. Budgeting is a crucial money management tool that involves balancing one's income and expenditures. Misusing credit can lead to excessive debt that cannot be repaid, which may ultimately result in personal bankruptcy.
Financial institutions, such as banks, provide the means to save and manage money securely while also making loans. Nevertheless, borrowers have the responsibility to manage their debt and should understand the implications of borrowing on their financial well-being. Furthermore, planning for unexpected events and managing risks through appropriate insurance strategies is also a significant aspect of avoiding financial distress that can lead to bankruptcy.