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 January 2017, about 54,571 people across the United States filed for either chapter 7 or chapter 13 bankruptcy. Medical bills are often the biggest culprit, with 62 percent of personal bankruptcies being caused by unaffordable medical care.
Medical care is becoming more and 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, such as decreased hours or job loss. 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.
It may seem as if the unemployment rate in the country is on the decline, but 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 uncontrolled spending. 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.
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. Although this percentage is small, it still 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 on top of their other expenses. Like legal expenses, student loans cannot be discharged through bankruptcy. Bankruptcy can, however, discharge or restructure other debts to a more manageable level.
Finally, the last 1 percent of bankruptcy filers say that the primary reason they filed was 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, your car must be returned to you in addition to other property that may have been repossessed.
How Does Bankruptcy Affect Quality of Life?
Getting a bankruptcy attorney can help work towards giving you financial freedom in the long run, but there are also short-term benefits to expect, such as 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, as that will affect your ability to work and maintain your daily lifestyle. If you are worried about losing your most important possessions during the bankruptcy, note that 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, 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.