Filing for personal bankruptcy is never anyone’s first choice when it comes to rectifying a person’s finances but there are times when it becomes necessary. There are times when the negative aspects of filing for personal bankruptcy are outweighed by the benefits though it is safe to say that filing personal bankruptcy should only be used as a last resort.
Here are the top 4 reasons why people resort to filing for personal bankruptcy as the answer to their misfortune.
Medical Expenses
The leading cause of personal bankruptcy in countries without universal health care is medical expenses. This can be either expense incurred from a long-term illness such as cancer treatment or expenses from a sudden accident.
Despite most people having health insurance, most households and individuals still cannot pay their premiums for medical treatments that occur with long-term or trauma-related illness and are forced to declare personal bankruptcy. There are also several treatments or incidences that are not covered by medical or other insurances but are still necessary. In these cases, filing personal bankruptcy may be the individual’s only option.
Sudden Unemployment
The next most common reason for an individual to file personal bankruptcy is a sudden loss of employment. Unemployment benefits are designed to help people transition from a sudden loss of employment to a new job, but unemployment benefits do not replace a full salary. Taking into account an individual’s personal debt, a sudden loss of most of their income may lead to a person filing for personal bankruptcy.
Overwhelming Credit Card Debt
Credit debt is easy to use and, with ever-increasing interest rates, it’s easy for credit card debt to snowball into a real problem. Most adults in the United States have an average of over $5000 of outstanding credit card debt. While $5000 may seem like a manageable amount, the average American adds 12% to their credit card debt per year. It’s easy for this debt, which is easily available, to cripple someone’s personal finances leading to them having to file for personal bankruptcy.
Divorce or Marital Separation
During the process of divorce or marital separation, finances are also separated. For many people, this means their household’s income is split in half or more depending on who the primary breadwinner of the household was.
This can lead to a person’s monthly expenses suddenly becoming overwhelming and simply snowballing out of control. Many divorcees opt to file for personal bankruptcy in order to start their single life with a fresh slate and excepting the credit score decrease as collateral damage.
The Necessity for Bankruptcy
Considering the four most common reasons for filing for personal bankruptcy are medical expenses, sudden unemployment, credit card debt, and divorce or marital separation, it is not a stretch to say that bankruptcy is often utilized in times of great distress.
Personal bankruptcy, while at times can be necessary, has lasting effects that can hamper someone’s personal finances for decades to come. Despite this negative aspect of filing personal bankruptcy, it is a way for individuals to free themselves from what would otherwise be a hopeless situation.
It’s never too late to regain control of your life beginning with your finances. Trust the bankruptcy lawyers at Hines Law in Massachusetts to help you get back on track. For 20 years, our bankruptcy firm has been providing debt relief options through proper bankruptcy filings with sound representation and advice.
We specialize in Chapter 7 and Chapter 13 and will help you decide which option is best for you. If you have questions or want to learn more, contact our bankruptcy law firm for a Free Consultation.