5 Common Reasons People File For Bankruptcy

Filing for bankruptcy is often a last resort for homeowners and business owners alike. Unfortunately, the number of people filing for bankruptcy in the U.S. is steadily rising. We’ll explore five of the common reasons why people file for bankruptcy according to a Peoria, IL bankruptcy lawyer with our friends at Pioletti Pioletti & Nichols.

Losing Employment

Losing a job can be extremely devastating to your income. While some employees have emergency savings that they can dip into or receive a severance package from their job, most people who file for bankruptcy don’t have such safeguards. The fact is, millions of Americans are living paycheck to paycheck, even homeowners. Furthermore, many Americans can’t even afford a $400 emergency, let alone paying for rent and groceries after losing their job. Losing insurance can also be an issue following being unemployed, leading people to file for bankruptcy.

Medical Expenses

There’s no denying how expensive medical care can be in the United States, even when a person has insurance. Accidents or illnesses can strike at any time and can result in hundreds of thousands in medical bills. Americans will dip into funds like college funds, retirement funds, savings, and even home equity to pay for their medical bills. Most people filing for bankruptcy due to medical bills come from people who already have insurance.

Credit Issues

Credit cards grant people many opportunities and even rewards like travel bonuses. However, just like loans, it becomes easy to abuse credit cards and similar programs. Many people who file for bankruptcy do so because they end up spending more than what they have. Whether they’re using credit cards to pay off necessities or luxuries they could never afford before, accumulating lots of credit card debt can lead to filing for bankruptcy.

Divorce

While couples can spend thousands of dollars on getting married, the actual legal process of getting married in the United States can be as low as $10. However, getting divorced can be an extremely expensive legal process. Attorney and court fees themselves can cause soon-to-be-divorced couples to take on debt. Divorce quickly becomes financially messy when combined with alimony, child support, finding a new place to live, etc. Issues like being unable or unwilling to pay child support can result in wage garnishment. Of course, when contention exists, divorce generally becomes more expensive as both parties may need to hire an attorney or mediator to resolve the conflict.

Unexpected Disasters or Emergencies

Unexpected disasters or emergencies can range from extreme weather events like hurricanes, flooding, tornadoes, fires, or other events like being robbed. Unfortunately, many people are unaware that they need to purchase special insurance to cover issues like earthquakes. Furthermore, insurance may not cover all of a homeowner’s expenses. A home completely demolished by a tornado can force a person to have to find an alternative home. This can mean renting a place if they don’t have close friends or family. Other expenses like clothing, food, and transportation can also lead a person to file for bankruptcy.

If you need help, contact a bankruptcy lawyer in your area for help on your specific case immediately!