The statistics for bankruptcy in America proves that sometimes “the dream” takes a sideline to reality. The chance to begin again is available to people who are facing financial hardship.
The alarming thing about bankruptcy is that it is typically due to life events, not reckless spending. The reasons for filing vary from person to person.
What is bankruptcy?
The bankruptcy process is a legal proceeding that involves an individual or company that cannot meet their financial commitments. The process begins with the person that is unable to pay outstanding debts filing a petition.
Obtaining a lawyer for bankruptcy is critical for a variety of reasons, but most of all, you need an advocate during this stressful and challenging time.
The federal courts handle bankruptcy law according to U.S. Bankruptcy code. Different types of bankruptcies, also known as a chapter, exist to address the debtor’s needs.
Types of Bankruptcy
The various chapters of bankruptcy exist for different types of financial crises. Your attorney will guide you in deciding what type best suits your overall needs.
Chapter 7 is the most common bankruptcy. It allows an individual to resolve debts such as medical costs and credit card debt by selling assets. Typically people with few or no assets choose Chapter 7 because they have nothing of value to sell to pay back unsecured debt.
Chapter 11 is for businesses that need to reorganize and restructure to become profitable. It helps guide them in reducing costs and to find new ways to increase revenue.
Chapter 13 helps individuals with assets to find repayment plans that work. It typically involves installments over time, and the court allows debtors to keep their property and other assets as long as they continue on the decided plan.
Chapters 7, 11, and 13 are the most common forms of bankruptcy. However, others do exist. It is a decision that you and your lawyer make before filing a bankruptcy petition.
The Top 5 Reasons for Bankruptcy
Harvard University released a study that indicated medical expenses were the cause of 62% of personal bankruptcies. It makes it the leading cause, and most of the people who filed because of medical costs had health insurance.
Serious illness, unexpected sickness, and traumatic injuries result in sky-high medical expenses that wipe out savings and retirement and put people in financial crisis. Even if health insurance pays a portion of these costs, the amounts due out of pocket pile up and force many to file for bankruptcy.
Losing a job is rarely someone we expect to happen. Being laid off, terminated, or having to resign for any reason means a loss of income and instability that leaves us unable to pay our debts. The added stress of losing health insurance makes the situation even more stressful. Sometimes bankruptcy is the only answer.
Divorce leaves both parties in unexpected situations. Financially, it can be disastrous. With the addition of legal fees, child support, alimony, and other costs that stem from the dissolution of marriage add up, and that is before everything becomes settled. Sometimes the only way to come out from under debt is filing for bankruptcy.
Another cause of bankruptcy is natural disasters such as earthquakes, floods, and tornadoes. Homeowners’ insurance does not always cover these events. Even in the case of partial coverage, they can bankrupt a family.
Finally, people do misuse or overuse credit cards and loans. It is not always possible to pay off the excessive date, and it is easy to get behind on installments. Debt consolidation does not remedy the situation if it has gone beyond a person’s budget. Bankruptcy is sometimes the only answer.
An Attorney on Your Side
Debtors can file petitions for bankruptcy without the assistance of a lawyer; however, that makes a stressful situation even worse. Attorneys act as advocates during the process and use their knowledge of the law and the court system to help guide you towards the chance to begin again.