Each year, approximately 1 million bankruptcies are filed in courts across the country. The majority of these filings come from individual consumers just like you, whose reasons for filing are unique and nuanced.
But what are the most common factors that drive a person into bankruptcy? Could a Chapter 13 or Chapter 7 bankruptcy be in your future? This list of the three most common reasons why people seek bankruptcy help might hold the answer:
Did you know that medical expenses are now the leading cause behind people seeking out the help of Chapter 13 and Chapter 7 bankruptcy attorneys? One Harvard University study found that 62% of all individual bankruptcies are caused by an inability to afford the cost of medical care — even when 78% of the people who file bankruptcy have some form of health insurance. Getting sick or injured is an expense that’s impossible to plan for, meaning many people don’t have enough saved up to pay for the cost of their care.
Unexpected job loss
Job layoffs, terminations and resignations are often sudden and unexpected — and it’s tough to plan one’s finances around them. Without emergency savings in place, many people turn to credit cards to pay their basic living expenses, which quickly leads to unbearable debt that only a bankruptcy filing like Chapter 7 — which liquidates all this debt — can solve.
Poor financial habits
Bankruptcy is widely perceived as a solution for people who have rash, impulsive spending habits, spending more money than they earn. And this is true in some cases. When using credit cards to pay for the majority of one’s expenses, debt piles up fast; before long, it’s impossible to escape it without seeking a bankruptcy. And because bankruptcy stays on one’s credit report for 10 years afterward, it can help people learn how to spend their money more wisely and develop good habits for the future.
What are your thoughts on this article? Have any other questions for us about the difference between Chapter 7 and 13 bankruptcy or how to file for bankruptcy? Let us know in the comments below.