Every year, millions of Americans declare bankruptcy. People opt for bankruptcy for a fresh financial start for various reasons. In actuality, unforeseen life circumstances are the main reason most people need to file for bankruptcy. Here are some significant reasons you may decide to file for bankruptcy.
Job loss
Loss of employment is the most frequent trigger for bankruptcy. Although it should be rather evident, many people falsely believe that most people who declare bankruptcy have lived beyond their means. But research depicts a different image. Since most households are designed to stick to a budget, unexpected unemployment might cause significant disruptions to your plans.
It may be tough to pay the mortgage, utilities, or other essential expenses without a consistent source of income. You may have to depend on credit cards to get by until you can stand on your own again. Thankfully, bankruptcy allows you to press the restart button and deal with some of the bills you accumulate while unemployed.
Medical debt
The financial burden of even a mild medical emergency can rapidly become too great. An unanticipated medical issue that is not covered or is seen as the dreaded “pre-existing condition” will frequently cost a family thousands of dollars in unforeseen expenses.
As a result, bankruptcy is typically a viable option to get rid of it. Medical emergencies can occur without warning, and medical insurance frequently isn’t enough to cover costs. Filing for bankruptcy can help you deal with medical debt.
Divorce
A financial difficulty caused by divorce may eventually result in bankruptcy. The revenue previously supported by one household is now abruptly split in half. In addition to having alimony and child support duties to fulfill, one party can be suddenly left without a means of subsistence. It may become too difficult financially. Each year, divorce is a factor in thousands of bankruptcies.
Bankruptcy to prevent home foreclosure
An individual may file for bankruptcy to halt foreclosure on their home. A bankruptcy filing may result in a temporary foreclosure stay if it is about to happen. The stay is only temporary in a Chapter 7 bankruptcy, and the foreclosure might still happen eventually. A Chapter 13 bankruptcy proceeding, however, allows the homeowners an opportunity to make up missed payments.
Business failure
When a firm is experiencing financial difficulties, bankruptcy may be a practical solution. In some cases, declaring bankruptcy might allow a business to restructure its debts and carry on with operations. It’s the finest technique to close the deal in other circumstances. The wisest course of action might or might not be bankruptcy since there may be various ways to pay the debts associated with a business. But one of the reasons people declare bankruptcy is due to business failure.
Student loans
A student loan payment may equal a family’s monthly mortgage payment for some households. A bankruptcy filing does not result in the cancellation of student loans. But if you take care of other bills, it can be simpler for you to keep up with commitments.
