Top Five Reasons People File Bankruptcy

This topic may seem simple, because most people file bankruptcy because they owe more money that they can pay (or want to pay) and they have exhausted other options. However, different people get into this situation in different ways. Nearly all these financial problems are at least partially beyond the debtor’s control. So, these debtors are entitled to the fresh start the Bankruptcy Code guarantees.

A Chicago bankruptcy lawyer assists debtors before, during, and after filing. Before filing, attorneys review non-bankruptcy options, if available, such as debt negotiation or an IRS payment plan. Then, an attorney takes care of all the complex paperwork, ensuring an error-free filing process. Then, when the case goes to court, a Chicago bankruptcy lawyer strongly advocates for you.

Medical Expenses and Healthcare Costs

One of the leading causes of bankruptcy in the United States is medical debt. Even individuals with health insurance often face overwhelming medical bills after serious illnesses, surgeries, or long hospital stays. Treatment costs for these conditions, such as cancer, heart disease, or chronic illnesses, easily run into the tens or even hundreds of thousands of dollars.

The medical bills are only part of the story. When someone is unable to work due to illness while medical bills continue to rise, financial stress grows quickly. Many families turn to bankruptcy to eliminate or restructure medical debt and regain financial stability.

Job Loss or Loss of Income

Most people live from paycheck to paycheck. Losing a job quickly makes it difficult to pay for basic living expenses like rent or mortgage payments, utilities, groceries, and insurance.

Even a short period of unemployment usually leads to missed payments, late fees, and mounting credit card balances. If someone struggles to find new employment or is forced to accept a lower-paying job, debt may become totally unmanageable. Filing bankruptcy stops collections and creates a path toward rebuilding finances.

Excessive Credit Card Debt

These bankruptcy causes often overlap. For example, if Tom loses his job, he may use credit cards to pay everyday expenses.

Credit cards are convenient financial tools, but overuse quickly creates high balances of  high-interest debt and balances grow beyond a person’s ability to repay them.

Once minimum payments become too large to manage, people may find themselves trapped in a cycle of debt. Bankruptcy, usually Chapter 7, allows these individuals to discharge or reorganize this debt and begin rebuilding their financial lives.

Divorce or Separation

Divorce creates financial mayhem for both partners. Legal fees, child support, alimony, and asset division significantly impacts financial stability. In many cases, a household that once relied on two incomes must now survive on just one.

At the same time, each individual may still be responsible for joint debts accumulated during the marriage. These financial pressures can lead to missed payments, collections, and eventually bankruptcy. Filing bankruptcy after divorce may help individuals eliminate certain debts and start fresh.

Unexpected Life Events

Life is unpredictable. Unexpected events create severe financial hardship. Natural disasters, major home repairs, accidents, or the death of a family member disrupts financial stability.

These events often bring sudden expenses as well as reduce income. When savings are insufficient to cover these costs, debt grows rapidly. Bankruptcy offers a legal solution to manage or eliminate overwhelming debt these unforeseen emergencies caused.

Work With a Thorough Cook County Lawyer

No matter what kind of financial problem you have, there’s a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. The sooner you reach out to us, the sooner we start working for you.

Source:

congress.gov/bill/117th-congress/senate-bill/2598