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If you’re having trouble keeping up with your bills, declaring bankruptcy is the right move for you. Before declaring, learn a few facts and have access to an experienced bankruptcy attorney.

What Leads to Bankruptcy in the US?

In December 2018, about 747,319 people across the United States filed for either chapter 7 or chapter 13 bankruptcy. Findings show an immense increase in filings when compared to 2017’s 54,571 instances of filings. Medical bills are often the biggest culprit, with 62 percent of personal bankruptcies being caused by unaffordable medical care.

Medical care is becoming more expensive compared with the growth in other necessary expenses such as food and housing. This disproportionate increase in the cost of medical care has left many Americans with bills they can’t pay for health issues they did not anticipate. 42 percent of all bankruptcies in recent years have been caused by medical expenses.

Another issue that commonly leads to bankruptcy is a reduction or complete loss of income. 22 percent of all U.S. bankruptcies cite “unemployment” as the cause. Loss of income can cause people to use their credit cards to pay for bills, which creates even more debt. Even those who manage to avoid income loss and credit card debt may still deal with other problems that lead to bankruptcy, such as legal fees from divorce, student loans, and unexpected major expenses. A bankruptcy attorney can help you address these concerns if you’re in over your head.

Many who experience a loss in employment through abrupt termination or layoffs encounter a situation where they were not prepared for the unexpected. Without any emergency funds or sufficient savings to keep up with current expenses, it can be difficult to prevent debt from rising to an uncontrollable amount. For those who are unable to find a new job within a certain amount of time or retain their initial amount of income, it is likely they will need financial assistance.

Currently, the unemployment rate in the country seems to be on the decline. But the reason is not what it seems. A large reason for this is because massive amounts of people have stopped looking for work. Although they are no longer classified as “unemployed” they still do not have a steady means of income.

15 percent of all filers say that credit card, mortgage, and other large debts are their cause of bankruptcy. Unfortunately, what led many Americans to this point was a lack of discipline in spending. Poor and excessive use of credit can lead to difficult outcomes where making minimum payments for car notes, credit card bills, or other debts is not possible. A lack of controlled spending and financial advising can lead individuals to unfortunate scenarios. When an individual’s income is being outweighed by the amount required to be spent, a lack of action can lead to a loss of control. Banks and other lenders were also too eager to lend money in many circumstances. Bankruptcy attorneys can often help re-organize credit card and mortgage debt to be more manageable, but few take advantage of this generous service.

8 percent of all filers cite “legal fees” as their reason for bankruptcy. These legal fees include expenses such as child support payments, alimony and other expenses that cannot be remediated by bankruptcy. Although legal fees cannot be discharged, other debts can be discharged with bankruptcy, freeing up the filer to be able to fulfill their legal financial obligations. Situations can worsen when such required payments lead to wage garnishments to cover the necessary payments, thus preventing the affected party from taking care of other pending payments and debts.

7 percent of filers filed for bankruptcy primarily because of an unexpected disaster such as a fire, flood or hurricane. When homeowners do not have adequate insurance, they have to pay out of pocket for these expenses, which are often too great to pay without insurance.

The Outliers of Bankruptcy Causes

The remaining five top reasons that Americans file for bankruptcy account for only 6 percent of all U.S. bankruptcy filers. These five reasons include:

1.5 percent of filers say that their main reason for bankruptcy was so that they could keep their home. Many individuals use bankruptcy to successfully restructure their debts so that they can avoid foreclosure.

Another 1.5 percent of filers cite “no structured financial plan” as the main reason for bankruptcy.Though it seems small, it accounts for hundreds of Americans who could have avoided bankruptcy had they set a sound budget for themselves.

1 percent of all bankruptcy filers say that they filed to keep up with their utility payments like heating, electrical and water. Like those who file for bankruptcy to avoid the foreclosure process, many attempts to restructure their debts so that they can keep up with their monthly living expenses.

Another 1 percent of Americans choose to file for bankruptcy because they can no longer manage their student loans. Like legal expenses, discharging of student loans cannot take place through bankruptcy. Bankruptcy can, however, discharge or restructure other debts to a more manageable level.

Finally, the last 1 percent of bankruptcy filers had filed so that they could keep their car back. If you fall behind on your car payments, a creditor can repossess your vehicle. As soon as you start bankruptcy proceedings, returning ownership of your car to you must take place in addition to other properties.

How Does Bankruptcy Affect Quality of Life?

Getting a bankruptcy attorney can help work towards giving you financial freedom in the long run. However, there are also short-term benefits to expect. This can include the ability to stop foreclosure on your house, so you and your family don’t lose your home. It’s also important to not lose your means of transportation. This can affect your ability to work and maintain your daily lifestyle. If your worries include losing your most important possessions during the bankruptcy, you could keep more than you think.

Get a Bankruptcy Attorney Now

If you are considering declaring bankruptcy, talk to a lawyer with experience in this area. It’s helpful to find out if you’re eligible and if bankruptcy would lead to the results you’re hoping for. If you find out that this is the case, you’re going to need fast answers to your questions. And you’ll also need help filling out important paperwork, reminders regarding deadlines, and more.

If you’re ready to get a real bankruptcy attorney, contact Malaise Law Firm today to schedule a free consultation. Mr. Malaise and his firm have served many clients in San Antonio on bankruptcy matters.

Last Updated: January 2018

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