Most Common Reasons for Needing to File for Bankruptcy |

Most Common Reasons for Needing to File for Bankruptcy

Filing for bankruptcy no longer has the stigma that it had 25 years ago, when the economy was booming and everything was coming up roses. Since 2005, where bankruptcy filings reached an  all-time high, people in the U.S. have continued to take advantage of the bankruptcy laws afforded to them, with an increase of 30% in personal bankruptcy filings since 2015. When things get tough and the unexpected happens, it’s difficult to hang on for an extended period of time. Eventually, you run out of options. That is what the U.S. Bankruptcy Code is for – to help you get through the tough times and allow you to start over. All of our clients have uniquely stressful financial situations – they might be shelling out for unexpected expenses, or they have suddenly found their monthly income drastically reduced. This post will explore some of the different contributing factors for people considering bankruptcy as an option to get them through a difficult time.

  • Medical Expenses
    In 2014 it was estimated that 1.7 million Americans lived in households that would file bankruptcy due to overwhelming medical bills. Similarly, it was estimated that in the same year three in five bankruptcies would be filed for the same reason. Most medical issues cannot be planned for and unfortunately, insurance does not typically cover all of the medical expenses that are incurred. Depending on the severity of the illness or injury, it can feel that there is no end in sight when those medical bills start rolling in.
  • Divorce
    Divorce is expensive any way you look at it. Maybe you had to pay attorneys’ fees, you are required to pay spousal maintenance or child support, or maybe you are suffering from the effect of now having a reduced income. All of these things may reduce the amount of money you have each month to pay your regular monthly expenses. Divorce can be financially stressful, but a bankruptcy can help alleviate some of the stress that you are dealing with. Generally, domestic support obligations are not dischargeable in bankruptcy, so it is important to speak with an experienced attorney to determine your best options in this situation.
  • Job Loss
    Losing a job will make anyone feel like they can barely keep their head above water. In a year where money is tight  for everyone, including businesses, companies around the country are tightening their purse strings by eliminating the need for certain employees. Termination of employment, voluntary retirement or losing a job due to sickness all result in slashed incomes and escalating expenses.
  • Credit Cards
    Credit card debt is a big factor for consumers who are considering filing for bankruptcy. It can be the realization that even after years of paying off debt, you won’t be any better off in the future than you are now. Maybe you need to start saving for retirement, or enjoying life with your kids – maybe you just want to get away from the crippling pressure of debt, collection calls and endless stress. Sometimes enough is enough, and you don’t want to live under the shoulder of burden anymore.
  • Foreclosure
    Learning that your house is going to be foreclosed on is tremendously stressful and a frightening reality to face. If you are falling behind on your mortgage and you can see the writing on the wall, or if you received notice of a foreclosure, it is beneficial to consider a bankruptcy to help you get back on track. (Learn more about the differences between a Chapter 7 and a Chapter 13 bankruptcy HERE).
  • Unexpected Events
    We’ve all been there – maybe the transmission on your vehicle needs to be replaced, maybe you had an unplanned trip to the emergency room. This happens to everyone, and unless you’re prepared for a potential financial setback to the sum of thousands (and let’s be honest, who is?), then unexpected expenses can cause huge ripple effects for your finances further down the line. Maybe it leaves you depending too much on credit cards, maybe you have to take out a loan to get by – sometimes life just happens.
  • Student Loans
    Student loans are a big contributing factor for individuals who are considering filing bankruptcy, even though they are hugely difficult to discharge. So why do people who struggle with student loan debt file for bankruptcy? Well, the financial burden of the debt can have serious negative impacts on an individual’s lifestyle and financial profile. Given that 43.3 million Americans are struggling with student loan debt in 2016, it isn’t that much of a stretch of the imagination to envision such a graduate relying too heavily on credit cards and loans to subsidize their cost of living. And that’s where the cycle of debt begins.

If any of these factors sound too close to home, it will be beneficial for you to consider filing a bankruptcy. Call (602) 264-0500 now to schedule your no obligation consultation with an attorney and get more information about your options.