What Are the Most Common Reasons People File for Bankruptcy?

 Posted on October 04, 2022 in Bankruptcy

Though no one wants to have to file for bankruptcy, it may sometimes be the best option available. Many Americans face situations where debts become overwhelming, and paying back what is owed while also being able to meet a family's ongoing needs may become impossible. Bankruptcy can be the ideal way to receive relief in these situations, and it can often help resolve debt-related issues before they get worse and lead to consequences such as repossession or home foreclosure. By understanding some of the most common reasons people pursue bankruptcy, you can realize that you are not alone and that you have options.

Financial Issues That Often Lead to Bankruptcy

The need for debt relief can arise in a variety of situations, including:

• Job Loss or Reduction in Income - One of the most common reasons people file for bankruptcy is due to a loss of income. This can come in the form of a job loss or a significant reduction in salary. If you lose your job, it can be difficult to make ends meet, especially if you have a family to support. If you have exhausted all other options, such as borrowing money from friends or family or selling possessions, filing for bankruptcy may be your best option. 

• Medical Expenses - Bills related to medical treatment are one of the primary sources of debt for many families. Even with health insurance, medical bills can add up quickly, particularly if you experience a major health event such as an accident or hospitalization. These issues can be compounded by the loss of income a person may experience if they are unable to work due to a serious illness or injury. If you find yourself unable to pay your medical bills, it may be time to consider bankruptcy.

• Divorce - The end of a marriage can be both emotionally and financially draining. The legal fees and other expenses involved in the divorce process can lead to difficulty on their own, and some people may be required to make ongoing child support or spousal support payments after the process is complete. For those who are struggling to make ends meet after an expensive divorce, bankruptcy may provide some relief. However, it is important to note that domestic support obligations such as alimony or child support cannot be eliminated through bankruptcy, and any past-due amounts will need to be paid in full. Fortunately, by discharging other debts through bankruptcy, a person may be able to become current on these payments and avoid financial difficulties in the future.

• Business Failure - Business owners may face significant financial difficulties if their companies fail. This is especially true for those who operate a sole proprietorship and have combined their personal assets with the assets owned by their business. For those who may be held personally liable for business debts, bankruptcy may provide much-needed relief. Small business bankruptcy may also be necessary to address debts owed by a business or to reorganize business operations so that a company will be able to succeed in the future.

• Credit Card Debt - While the use of credit cards is common, there are some situations where a person or family may be unable to keep up with payments, and high interest rates can cause credit card debts to balloon to amounts that are impossible to repay. Those who feel that they are buried under a mountain of credit card debt may use bankruptcy to help get their finances back on track. 

Contact Our Charlotte Bankruptcy Lawyer

If you find yourself in a situation where bankruptcy seems like the best option available, know that you are not alone—thousands of Americans file for bankruptcy each year due to the issues described above or because of other financial difficulties. Before making the decision to file for bankruptcy, it is important to speak with an attorney to discuss all of your options. At Blossom Law PLLC, our Huntersville bankruptcy attorney can help you understand the bankruptcy process, and we will work with you to find the best debt relief solutions for your situation. Contact us today at 704-256-7766 to schedule a free consultation.

Sources:

https://www.investopedia.com/financial-edge/0310/top-5-reasons-people-go-bankrupt.aspx

https://www.abi.org/feed-item/the-3-most-common-reasons-why-people-file-bankruptcy