Bankruptcy can happen to anyone. It is not a defect of a person’s character. In fact, recent statistics show that bankruptcy filing rose 13% last year. People go bankrupt when they are unable to pay off their debts. The legal process of filing for bankruptcy can help people restructure or eliminate their debts. The reasons why a bankruptcy vary but the top reason include loss of job/income, medical issues, living beyond means, and other personal issues.
Job Loss or Significant Loss of Income
Many people who lose their jobs, or get their hours at work drastically cut, also face financial problems. In many of these cases, bankruptcy may happen not because the person mismanaged money, but simply due to an unexpended loss of income.
Sometimes people have a loss of income due to starting (or returning) to school.
Many students are unable to work full time in addition to going to school. In fact, many academic scholarship programs limit the number of hours you can work. Internships or work study offers are usually very low pay.
In the cases mentioned above (loss of job, work hours cut, or going to school) many times the people are just not producing enough income to cover their daily expenses. As such, many people in these situations eventually rely on credit cards and unfortunately find themselves in trouble after they maxed them out and cannot afford the minimum payment.
Illness or Injury and Medical Expenses
Many people go bankrupt after dealing with illness or injury. In these cases, people have been dealt with a hand that they cannot do much about. Sudden illness or injury can completely disrupt one’s life. A person may not be able to work after such a trauma. As such, they are unable to rely on their normal salary. Additionally, many people will face accumulating medical bills that they are not able to pay.
Living Beyond Your Means
Bankruptcy also commonly happens when a person either lives beyond their means or they mismanage money. People who extravagantly overspend or have shopping addictions will find themselves in financial trouble. Filing for bankruptcy, along with financial and psychological counseling, can help people get their life back on track.
Personal Reasons That Affect Finances
There are many unexpected personal crises that can happen that negatively affect one’s finances. Common personal reasons that can contribute to bankruptcy include:
- Depression or mental health crisis
- Loss of Spouse or Loss of Loved one
- Substance abuse or alcoholism
Filing for Bankruptcy
If you are feeling burdened by debt and do not know how to get out of it, then it may be time to start thinking about filing for bankruptcy. Bankruptcy could be the lifeline to help you get out of stress and insecurity. Bankruptcy is the legal proceeding that allows people to either eliminate debts, or to restructure their debt into manageable payments over time. The first step is for the person to file a bankruptcy petition in federal court. Individuals may file for Chapter 7 or Chapter 11 Bankruptcy. As bankruptcy law is complicated, it is always recommended to consult with an attorney before starting any petition.
Consult With a Qualified Bankruptcy Law Firm to Discuss Your Options
If you are considering your options, then the first thing to do is to reach out to a bankruptcy law firm with any questions you may have. Each person’s finances and personal situation is different, and a bankruptcy attorney can only effectively determine the best legal strategy to take for your case. Although right now you may feel overwhelmed with what to do, an experienced debt attorney can help guide you through the process. Filing for bankruptcy may be the first step to your financial freedom.