Most people don’t think that bankruptcy will happen to them. It isn’t something that many people plan for. However, bankruptcy is undeniably on the rise in America. Over the past few decades, an alarming number of Americans have been unable to pay off their debts on their own. This has caused more and more people to turn to bankruptcy as their best option. People don’t plan for bankruptcy because sometimes people don’t plan to face the causes of bankruptcy. Many bankruptcy applications are a result of unforeseeable circumstances. Understanding the most common factors that lead to bankruptcy will help you avoid it.
The most common cause of bankruptcy in America today is medical expenses. Unfortunately, there are many holes in health insurance coverage in America. Many people who are seriously injured or ill have to give up their jobs, and oftentimes this means giving up medical insurance as well. This can result in outrageous medical bills. Even if you do keep your health insurance, you will still have to pay out-of-pocket for services that are not covered by insurance or for co-payments. The combination of a loss of income (due to time off from work or the loss of your job) as well as overwhelming medical bills can quickly lead to debt. In some cases, bankruptcy is the only real option for getting rid of such expensive medical bills.
Another common cause of bankruptcy today is job loss. While the job market is not as low as it has been in recent years, our economy is still suffering and a lot of people are being laid off or fired from work. And finding a new job isn’t exactly a piece of cake. It’s no surprise that a loss of income can lead to an inability to pay bills. If this continues for a long period of time, you could be facing some serious debt. When this happens, many people choose to file for bankruptcy.
People file for bankruptcy when they have a lot of debt. Debt can occur if you poorly manage your credit. If you can’t control your spending, it’s not difficult to spiral out of control and face massive credit card bills, installment debt, car payments, and mortgage payments. If your debt gets to the point where you can’t even make minimum payments, you’re in trouble. As a result, people with a lot of credit card debt or other unsecured debt choose to file for Chapter 7 bankruptcy in order to have the debt discharged. If this isn’t an option, Chapter 13 bankruptcy can provide some relief, as you will be given more time to pay your debt based on a repayment plan.
One other common cause of bankruptcy is divorce. This is kind of a chicken-and-egg situation, because sometimes it’s hard to tell which comes first. In many cases, the stress of bankruptcy can cause a divorce. However, in just as many situations, it is the divorce that causes bankruptcy. Divorce or separation can be extremely expensive. Lawyer and court fees can be enormous, and those are just fees associated with the divorce process. After divorce, you have to figure out how to support yourself on your own and you might be paying child support and/or alimony on top of it. Being unprepared for these changes could lead to a lot of debt.
These are some common causes of bankruptcy today. If you are considering filing for bankruptcy for these reasons or any others, you can get more information and legal assistance from a Connecticut bankruptcy lawyer like me.