Top 5 Reasons People File for Bankruptcy
In the U.S., the number of people who file for bankruptcy is on the rise. Here are some of the most common reasons people go bankrupt:
The easy availability of credit cards and installment loans causes many people to spend money they don’t have. When this behavior gets out of control, some may find themselves unable to make even the minimum payment on these debts. While a home equity loan or debt-consolidation plan may help manage these debts in the short term, many people who choose these solutions find themselves eventually filing for bankruptcy.
Loss of Employment
Losing a job can be devastating to one’s personal finances. While some people may have an emergency fund on hand, or receive a severance package, the majority of bankruptcy filers who have suffered a job loss did not have these safety nets in place.
Loss of insurance coverage and the cost of individual insurance is a drain on an unemployed person’s limited resources. If the job seeker finds themselves without a steady income for a long period of time, they may fall behind on bills, causing them to turn to bankruptcy.
Spending More than You Make
The road to bankruptcy begins with a simple formula: more money is going out than coming in. Over time, this can lead to missed payments and reliance on credit. Many people also do not have an emergency fund or savings to see them through tough financial times.
Serious injury or illness can affect anyone, at any time, and result in hundreds of thousands of dollars in medical bills. Once savings, college funds, retirement accounts, and home equity have been wiped out, the only other option to address these debts may be bankruptcy.
So many people fall behind on their medical bills, it accounts for 62% of all bankruptcies. In fact, the majority of bankruptcy filings related to medical bills came from individuals with health insurance!
From start to finish, divorce can be an extremely expensive experience. Legal fees can be extremely expensive for both parties, before piling on costs of alimony and child support, and the new cost of maintaining two separate households. If a person is unable (or unwilling) to make alimony or child support payments, they may experience wage garnishment, making them even less likely to be able to cover all their debts. When one party refuses to make these payments, it can also leave the recipient in financial trouble.
Natural disasters like tornadoes, hurricanes, or earthquakes, or in the case of loss of property by theft, lack of insurance and emergency savings can force people into bankruptcy. Many are not aware that special insurance is required to recoup losses in the case of some natural disasters, like earthquakes. Those who are not covered can face the costs of emergency food and shelter, and replacing important items lost in the disaster. In particular, those who lose their clothing may find themselves unable to dress appropriately for their job, causing potential loss of income.
No matter the reason, filing for bankruptcy is a big decision that will have lasting impact on your financial life. It is important you talk to a professional who can assess your particular situation and give you advice on how best to get yourself out of debt. With 23 years of experience, Milwaukee bankruptcy attorney Michael Burr and the experts at Burr Law Office are the advocates you need. Give us a call at 262-827-0375 today.