Personal Finance

When Do You File For Bankruptcy? Should You?

Bankruptcy is probably the last legal resort for consumers and businesses to get rid of some or all of their debts. For a lot of Americans, filing for bankruptcy is a sore point. It says you’re a failure. It says you’re a loser. Sadly and wrongly, it puts you in a very unfavorable, unflattering light. In reality, people file for bankruptcy for various reasons, many of which are simply beyond their control.

Why People File For Bankruptcy

The key reason people file for bankruptcy is a no brainer. They can no longer pay their bills. Why? There are various reasons. Very often it has less to do with being irresponsible and more with unforeseen, extraordinary circumstances that can hit anybody. What follows are two of the most common situations that lead to bankruptcy:

A Sudden Illness or Some Serious Injury : More than sixty percent (60%) of all bankruptcies filed are because of medical bills. No doubt, this has to do with the increasing cost of health care. But, also it has to do with the fact that until 2012, sixteen percent (16%) of American adults weren’t covered by any form of health insurance. Even with the emergence of the Affordable Care Act, many individuals remain uncovered because they couldn’t afford to enroll in employer-sponsored plans and are not qualified for health care subsidies. For these guys, a sudden serious illness that hits them or their family can cost them tens of thousands of dollars in hospital bills. When a chronic condition sets in, this can also prove to be as expensive.Costs of on-going care tends to add up to staggering figures. Even with health insurance, it could happen that medical care costs would go beyond one’s capacity to pay. When people find themselves in a dire situation like this, there’s only one thing to look at – bankruptcy.

Death of a Spouse and Divorce : When married couples divorce, many reasons are cited. At the top of the list though is usually, money troubles. Unfortunately, separating in the midst of financial problems doesn’t resolve the debts or loans. In fact, it takes away an income element from the equation and actually makes matter worse.

If you had a couple where one spouse makes significantly more money than the other, the partner who earns less could wind up being a pauper. The costs alone that come with divorce like legal fees, spousal and child support can seriously put a heavy strain on finances.

The sudden death or illness of a spouse, especially if he is the principal breadwinner could put the living mate in dire straits. All it takes is someone to pass away without having any insurance or leaving behind some big medical bills and other debts to send the surviving family jumping over the roof. For these people, bankruptcy is the only way for them to get their lives back.

Anyone who finds himself/herself in a similar situation, where they’re in over their heads in debt may look and seriously consider filing for bankruptcy. Research the internet. There are good professional lawyers who are out there willing to help with good advice.

Sources:
Forbes.com
CNN.com

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