While filings for Chapter 7 and Chapter 13 bankruptcy are ultimately down in 2021, the situations that often lead to bankruptcy are on the rise. Bankruptcy doesn’t happen in a vacuum, nor does it happen overnight and plenty of those underlying bankruptcy causes were alive and well throughout the past year.
As the root causes of debt continue, the economic relief payments and unemployment checks may have helped some people stay afloat. But as these payments cease, the overwhelming debt that people have been baring will be unmasked.
Bankruptcy is, in short, a way for you to declare legally that you do not have the means to pay off the debt you owe back.
If bankruptcy is granted, then collections calls stop and the court outlines a plan for you to work towards paying off your debt through a few different avenue options depending on which chapter you filed. Knowing what can lead to one needing to declare bankruptcy as a last resort can be crucial to protecting yourself from falling victim to rising trends.
Below are some of the life situations that could result in a need to declare bankruptcy only to be magnified by the current global situation.
Divorce
The breakup of a marriage is traumatic enough for family members and friends. But it can become even more brutal when the sudden loss of assets coupled with the cost of divorce leads to one partner or both declaring bankruptcy. This can be especially true if one spouse acted as the bread winner, leaving the other to fend for themselves (depending on the laws of your state) and to cover their own legal fees as well as new living expenses.
Unexpected Events
The unfortunate thing about life is we truly cannot predict much about it. Though insurance helps, unexpected medical emergencies can cost a family tens of thousands out of pocket that they have no hope of paying back. Unexpected job loss can take someone from living a comfortable life to suddenly draining their savings in order to meet their cost of living while unemployed. These things can’t always be predicted and can hit hard and fast.
Bad Financial Habits
Perhaps your bankruptcy comes by way of death by a thousand cuts. It’s not one catastrophic event that clears out your financial resources but a series of bad decisions over time that has left you broke. This could be taking out loans you can’t pay back, overspending a line of credit, making bad investments, or purchasing a house or car without payments well outside your budget. Or it could be a combination of these things that clears out your accounts and leaves you filing for bankruptcy.
Related Questions
Will my credit suffer if I declare bankruptcy?
Your credit score will initially take a hit when you declare personal bankruptcy, but it usually recovers within a few years of completing the bankruptcy process so long as you maintain healthy financial habits.
Does declaring bankruptcy make me financially irresponsible?
Far from it. Bankruptcy is actually the financially responsible thing to do and is designed to get you back on track and instill good habits into your financial life. It also is not something that always arises out of poor decision making but sometimes simply bad luck.
Bankruptcy Attorneys in Massachusetts Can Help
If you have concerns about making ends meet and providing for your essentials, there is help available. For starters, speak to a bankruptcy attorney about your situation to find out if declaring bankruptcy is right for you.
Hines Law Offices located throughout the greater Boston area is a trusted bankruptcy law firm that provides sound advice and debt relief options. As a full-service bankruptcy firm, we can help you get back on track so that life can move on without the stress and worry of losing your home, car or paycheck. Call and speak to an attorney today, Free and see if filing for bankruptcy works for you.