Top 5 Reasons Why People Go Bankrupt
People often go bankrupt due to medical expenses, unaffordable mortgage payments, spending beyond their means or lending money to family. Rarely is one factor responsible for such financial instability.
Medical expenses are the leading cause of bankruptcy filings, often draining away savings, college funds and retirement accounts.
1. Unmanageable Debt
Debt can quickly become overwhelming. All it takes is one unexpected event for debt to spiral out of control and lead to bankruptcy; while even daily overspending and improper credit use can put undue strain on finances exacerbated by interest rate hikes.
Unfortunately, many individuals file for bankruptcy due to overwhelming debts ranging from credit card bills and car loans, mortgage payments, etc. Some may have come about through irresponsible spending decisions while others could be the result of job loss, injury or other unfortunate occurrences.
Debt that becomes unmanageable puts immense strain on households and can even lead to family breakdown, financial exclusion and physical/mental health problems. However, steps can be taken to regain control of finances and avoid bankruptcy.
An injury or illness can quickly rack up medical expenses into the hundreds of thousands of dollars, prompting many individuals to file bankruptcy as medical costs quickly deplete savings, retirement accounts and college funds. Many had health insurance but were still unable to pay co-pays and other out-of-pocket costs.
Any major financial calamity can produce strong emotions that are difficult to control. The stress of selling assets and living by a budget may cause feelings of resentment, shame and failure that have lasting repercussions in relationships and careers – possibly leading to depression. But bankruptcy provides an avenue back onto firmer ground.
2. High Medical Bills
As health care costs in America skyrocket, more Americans are finding themselves overwhelmed by medical bills – in fact, studies indicate that medical debt accounts for as much as 62% of all bankruptcy filings!
Costs associated with healthcare may arise for any number of reasons, from an illness causing significant discomfort for you or a member of your family, to injuries incurred from an accident that have left significant medical bills owing.
But regardless, bills can quickly become overwhelming and threaten your financial future if not managed appropriately, leading even to bankruptcy which will have lasting repercussions for years.
Though the number of those filing bankruptcy has decreased slightly since the passage of the Affordable Care Act, many families still find themselves in an extreme financial predicament. A recent study discovered that approximately 530,000 families file for bankruptcy annually – most often because of medical debt issues.
No exact numbers exist regarding how many bankruptcies are caused by high medical expenses due to different studies employing various methodologies and interpretations of results, yet it remains an extremely real problem – people sell their homes, declare bankruptcy or even lose their lives over these bills.
While filing bankruptcy will negatively affect your credit, it can also help eliminate medical debt and improve your chances of avoiding it in the future. Careful planning and consideration are necessary – get assistance as early as possible for best results.
3. Inability to Pay Utilities
If you can’t pay your utilities on time, the company may take action against your account to shut it off completely – something which should be avoided at all costs. Take steps now if this situation arises in order to preserve service for everyone!
Utility bills are unsecured debts that can be discharged in bankruptcy. However, until that balance is paid in full you must continue making payments and living within your means to avoid bankruptcy and other financial complications.
Many individuals find themselves struggling to meet ends meet and finding themselves unable to pay their utility bills, due to unexpected expenses, overspending beyond their means or rising utility prices such as gas and electricity costs. Some resort to bankruptcy as an extreme measure in these instances; however there are steps consumers can take such as negotiating debt settlement agreements with creditors in order to prevent bankruptcy filing.
Businesses can take steps to avoid bankruptcy, including adopting a more conservative growth approach and being able to accurately forecast cash flow. Furthermore, an organized bookkeeping system is essential for owners in understanding the true state of their finances.
if you are struggling to pay your utility bills, it is crucial that you speak with an experienced bankruptcy attorney as soon as possible. An attorney can explain your options and possibly help you avoid bankruptcy if possible; additionally they can assist in handling outstanding debts as well as answering any inquiries about how bankruptcy affects utility bills. You should not ignore your bills as these may lead to serious repercussions such as losing your home or having a bankruptcy note appear on your credit report for 10 years.
As basic utility costs escalate, some homeowners find themselves unable to make mortgage payments on time. This puts them in jeopardy of losing their homes and having to move out onto the street; to prevent foreclosure from taking place many opt for bankruptcy protection as an avenue.
If a homeowner misses multiple mortgage payments, their lender may initiate legal proceedings to repossess and auction off the house in order to recover their loan balance. This is known as foreclosure and can cause immense stress and expense for both borrower and lender – indeed it is one of the leading causes of personal bankruptcy filings across America.
One advantage of bankruptcy filing is forcing most creditors to cease collection efforts, including foreclosure sales, immediately upon receiving notification that a bankruptcy petition has been filed. Even if there was scheduled sale planned shortly after filing bankruptcy petition, its sale may likely be postponed until after bankruptcy proceedings have concluded.
Depending on your state, lenders may be able to secure court approval to lift the automatic stay and resume foreclosure proceedings; however, this option may not always be feasible and most lenders prefer delaying foreclosure until after bankruptcy has been completed.
If you are facing foreclosure, it is critical that you consult with a knowledgeable bankruptcy attorney as soon as possible. Although bankruptcy can have detrimental effects on your credit rating, it can also offer an opportunity to start fresh financially and rebuild stability.
Unemployment can create serious financial difficulties, including being unable to meet debt payments on time. When you lose your job, the strain of paying mortgage, car, and other debt payments could become unmanageable; you might also struggle with utilities like heat, water and electricity bills as unemployment benefits often fall far short of what was earned before leaving work.
Injury or illness can leave people facing thousands of dollars in medical bills. This is one of the primary causes of bankruptcy filings; according to academic researchers’ estimates, 66.5 percent were related to health-care expenses.
Many individuals who file bankruptcy have exhausted all savings, retirement accounts and other sources of income in an attempt to stay current on their debts. Credit card debt might have become overwhelming or they may have even turned to cash advances such as payday loans in an effort to make ends meet.
When facing unemployment, it is essential to remember that bankruptcy can be a lengthy and complicated process that will have lasting repercussions for up to 10 years. If possible, try increasing your income with overtime work or by taking on second jobs, so as to remain current on debt payments without turning to credit cards to make ends meet. In addition, set aside enough savings money in an emergency savings fund in case bankruptcy becomes necessary in six to 12 months’ time.