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Chicago Bankruptcy Lawyer > Blog > Bankruptcy > These Five Situations Cause Most Bankruptcy Filings. Which One Hits Closest to Home for You?

These Five Situations Cause Most Bankruptcy Filings. Which One Hits Closest to Home for You?

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Every year, thousands of your neighbors file bankruptcy. These families generally endure the same financial hardships as you do. They turned to bankruptcy to take control of their financial situations, and you should at least consider this approach as well.

Chapter 7 bankruptcy eliminates unsecured debts, like medical bills and credit cards, in just a few months. Chapter 13 bankruptcy gives families up to five years to catch up on secured debts, like home mortgage payments. Both plans end creditor harassment and protect your financial assets.

A good Chicago bankruptcy attorney is an important part of this process. Bankruptcy petition preparers just file paperwork. Attorneys represent you in court if things go bad. Attorneys also give you solid legal advice every step of the way.

Medical Bills

The Affordable Care Act was supposed to greatly reduce the number of medical bankruptcies in the United States. Yet medical bills still trigger about two-thirds of all filings in Indiana.

Medical bankruptcies are usually connected with chronic serious illnesses, like cancer. Even if the debtor has insurance, the debtor is usually still responsible for a significant chunk of these costs. Since so many people live from paycheck to paycheck, a few thousand dollars might as well be a few million.

Generally, doctors quickly sell unpaid accounts to debt buyers. Collectors are more aggressive than ever, since the Supreme Court recently eliminated some of the consumer protections in the Fair Debt Collections Practices Act. So, once medical debt buyers enter the picture, a bankruptcy filing is almost inevitable. The only issue is how much harassment debtors are willing to endure before they file.

Job Loss

In many ways, a job loss is a lot like a chronic illness. Subsequent job searches usually take many months, and debtors often must accept a lower salary to re-enter the workforce. With little or no money coming in, many debtors must live on credit cards. That approach is obviously not sustainable for more than very short periods of time.

On a similar note, many people depend on side gigs, like ridesharing driving, to make ends meet. If these income sources suddenly dry up, the family could be in serious financial trouble.

Divorce

Other than medical bills, divorce might be the leading cause of Indiana bankruptcy filings. In many cases, the attorneys’ fees could be tens of thousands of dollars. Once the divorce is final, the effects could be even worse. It’s very expensive to maintain separate households. Additionally, alimony and child support payments might make it difficult to meet other monthly expenses.

If you and your soon-to-be-ex-spouse are still on good terms, it’s usually best to file bankruptcy before the divorce is finalized. Bankruptcy’s debt elimination greatly simplifies the property division process.

Credit Misuse

Some people overspend on luxury items. But these situations are extremely rare. Mostly, people misuse credit due to an above-mentioned problem. As stated, many people who lose their jobs pay the bills with credit cards. At the end of the month, the family is unable to pay the credit card bill, and the downward spiral continues.

Bankruptcy, especially Chapter 13 bankruptcy, does more than eliminate these debts. It also helps families develop the financial tools they need to manage consumer debt.

Unexpected Expenses

No one is immune from disasters like fires, floods, earthquakes, and plagues. If these losses are uninsured or underinsured, the loss could be devastating. Moreover, no one is immune from family emergencies, like a relative’s sudden death or unexpected legal problems.

These families often feel like their finances are spiraling out of control due to no fault of their own. Bankruptcy helps these people put their hands back on the steering wheel.

Reach Out to Experienced Lawyers

Everyone faces financial crises sooner or later. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.

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