What are Five Common Reasons People Apply for Bankruptcy?

Many people are considering filing for bankruptcy, especially after the turbulent economic time we have experienced. In the United States, the number of people who are filing for bankruptcy is on the rise. There are many different reasons why people file for bankruptcy, and each bankruptcy case is unique. However, there are some common reasons people apply for bankruptcy, and we will discuss them below.

Job Loss

Unexpected job loss can make staying current on your mortgage or rent and other bills impossible.  Some people have an emergency fund or obtain a severance package. However, most people who filed for bankruptcy did not have these types of safety nets in place. Specifically, loss of insurance coverage through your employer is a significant drain on an unemployed individual’s limited resources, causing them to fall behind. 

Credit Problems

Credit cards are easily and widely available today. Most Americans have credit card debt, and it is easy to become overwhelmed with credit problems. Some may find themselves unable to make the minimum payments on their credit card debts. Debt consolidation or a home equity loan plan may help you in the short term, but many people end up filing for bankruptcy as a long-term solution.

Overspending

In other cases, a person or couple simply spends more money than they make. Over time, spending more than you make can lead to missed payments and becoming reliant on credit cards. Many people do not have an emergency fund or enough savings to see them through difficult financial times.

Medical Bills

Serious illness or injury can affect any of us at any time. Even if a person does have health insurance, the deductibles and treatments that are not covered add up quickly. A serious medical illness can cost hundreds of thousands of dollars in extra medical bills. After savings, retirement accounts, and college funds have been wiped out, the only other option is to file for bankruptcy. Medical bills account for 62% of all bankruptcies in the United States.

Divorce

Divorce is another common reason people file for bankruptcy. Paying for a divorce can be extremely expensive. The legal fees, alimony, child support, and the cost of maintaining two separate households adds up quickly. When a person cannot or chooses not to make required alimony or child support payments, the court can garnish their wages. In these cases, they will be even less likely to be able to pay their debts. 

Questions About Filing for Bankruptcy? We Can Help

No matter the reason you file for bankruptcy, choosing to submit a petition is a big decision that will have lasting impacts on her life. It is essential that you discuss your case with a bankruptcy lawyer who can help you evaluate your unique situation and give you legal advice on how to get yourself out of debt. Contact the skilled San Diego bankruptcy lawyers at the Bankruptcy Law Center today to schedule your free initial consultation.