What are Some Common Reasons Why People File for Bankruptcy?

Everybody who files for bankruptcy has a personal reason for doing so. For some, it is a fairly easy decision and for others, it comes only after a prolonged period of analysis and searching for alternatives. No matter why you file for bankruptcy, understand that it is not a personal failure. It is a way to discharge the debts that are preventing you from living a financially secure lifestyle.
Below are a few of the common issues that can drive people to the point of filing for bankruptcy.

Medical Bills

According to a Harvard study, medical debt is the top cause of personal bankruptcy in the United States, accounting for 62% of cases. It is no secret that medical care is expensive in this country, even with health insurance.

If you are facing high medical bills, consider your alternatives before turning to bankruptcy to eliminate them. You could negotiate with your healthcare provider to lower the bill because of your financial hardship. If your injury was caused by another party’s negligence, you could recover compensation for your bills through a personal injury claim.

A Lack of an Emergency Fund When an Emergency Strikes

An emergency can be a sudden job loss, an eviction, a natural disaster, or a medical emergency. All of these require liquid cash and when no cash is available, an individual can be forced to rely on credit. Prolonged reliance on credit quickly accrues debt, which then compounds and can easily trap the individual in a perpetual cycle of growing debt.

Poor Credit Use

Irresponsible use of credit cards can also push an individual toward bankruptcy. It can be easy to let credit card debt spiral out of control by charging every purchase instead of using cash and making only the minimum payment each month when the credit card bill is due. Regular subscriptions that automatically charge a credit card, such as gym memberships and subscription boxes, often contribute to growing credit card debt.

Divorce

The end of a marriage can mean a lot of debt for one or both parties. Following a divorce, a few debt-causers can converge and put an individual into a difficult financial position:

  • Legal expenses and other costs associated with the divorce process. The average American divorce costs $15,000 to $20,000;
  • The cost of securing a new place to live and in some cases, new personal items like appliances and a vehicle; and
  • Adjusting to a single-income household after living with a spouse and enjoying two incomes.

Work with an Experienced Buffalo Grove Bankruptcy Lawyer

If you are considering filing for personal bankruptcy, first speak with one of the experienced bankruptcy lawyers on our team at Newland & Newland, LLP to ensure that you are making the most productive choice for your case. Contact our office today to set up your initial consultation with us. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.

(image courtesy of Aidan Bartos)

  • Newland & Newland LLP, Attorneys, Arlington Heights, IL
  • Lawyer.com