Most Common Reasons for filing BankruptcyBy W. Ron Adams | August 25, 2015 | 0 Comments
The bankruptcy statistics in America are alarming. Over the last fifteen years we have seen a dramatic rise in the number of people who are unable to pay off their debts. According to US bankruptcy court statistics, more than 1.5 million people file for bankruptcy every year. Most significantly, individuals make up nearly 97 percent of bankruptcy filings, not businesses.
Listed below are the most common causes of bankruptcy.
Harvard University recently completed a study that indicates that medical expenses account for over 60 percent of personal bankruptcy. The study shows that 72 percent of those filing had some form of health insurance, thus removing the myth that medical bills affect only the uninsured.
Each year, rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.
Many companies are cutting back on their expenses; and for many employees, this results in lower wages due to major pay cuts and reduction in bonuses. Many individuals find themselves struggling to maintain the lifestyles they’ve become accustomed to therefore bankruptcy is generally the end result.
The loss of income from a job can be devastating, whether due to layoff, termination or resignation. Many receive severance packages, but with no prior notice, job loss or benefit loss can deplete ones savings and emergency funds quickly. We often see overuse of credit cards to pay the bills and this alone can be disastrous.
Poor/Excess Use of Credit
Some people simply can’t control their spending. Credit card debt, car and other loan payments can eventually spiral out of control, until finally the borrower is unable to make even the minimum payment. If the borrower cannot access funds from others or otherwise obtain a debt-consolidation loan, then bankruptcy is usually the inevitable alternative.
Statistics indicate that most debt-consolidation plans fail for various reasons, and usually only delay filing for most participants. Although home-equity loans can be a good remedy for unsecured debt in some cases, once it is exhausted, irresponsible borrowers can face foreclosure on their homes if they are unable to make this payment as well.
If you haven’t paid that student loan off yet, you’re not alone. Statistics show that student loans account for at least one percent of all U.S. bankruptcies, which translates to nearly 15,000 bankruptcies a year.
Marital dissolutions create tremendous financial strain on both partners in several ways. First come the legal fees, followed by a division of marital assets, decree of child support and/or alimony, and finally the ongoing cost of keeping up two separate households after the split. The legal costs alone are enough to force some to file, while wage garnishments to cover back child support or alimony can strip others of the ability to pay the rest of their bills. Spouses who fail to pay the support assigned in the agreement often leave the other completely destitute.
According to statistics, more than one percent of Americans have to file for bankruptcy in order to avoid foreclosure on their homes.
Due to inflation, managing money is harder than ever; and a combination of bad budgeting and uncontrolled spending can provide a shortcut to skyrocketing debt and bankruptcy.
While bankruptcy can provide a sensible debt solution for some people, others have found that, by consolidating their debts, they can avoid the trouble and expense of bankruptcy and still take control of their finances. Whichever method works, the important thing is to start dealing with the situation as soon as possible — because debt is one problem that, unfortunately, doesn’t disappear on its own.
Cost of Living Expense Rising
For many homeowners struggling the rising costs of heating, air conditioning, groceries, taxes and other necessities can quickly help pave the way to bankruptcy.
As you have probably seen many of these reasons overlap, some lead to another. At W. Ron Adams Law, we can file Chapter 7 and Chapter 13 Bankruptcies for individuals and couples for a wide variety of reasons. Whether you are considering filing for one of these common reasons or for another reason entirely, call today to schedule your FREE Bankruptcy consultation.
We have helped thousands of individuals and families file Chapter 7 and Chapter 13 Bankruptcies. Our friendly, experienced staff will help you understand your options and determine which chapter of Bankruptcy is right for you.
Call us today at 859-727-1000 for a FREE Bankruptcy consultation. Get a Fresh Start today!