What are the Most Common Reasons for Bankruptcies?
Most people file bankruptcy because they want and/or need a fresh start. The Supreme Court has made it clear that this fresh start is available to honest yet unfortunate debtors. Honest debtors don’t have gambling debts or obligations related to illegal or illicit activities, like substance abuse or fraud. That’s why these debts usually aren’t dischargeable in consumer bankruptcy actions. Unfortunate debtors have financial problems which, for the most part, are not their fault. More on that below.
Once financial problems begin, they usually snowball and get worse. A Chicago bankruptcy lawyer helps debtors take control of their own financial situations. Chapter 7 discharges unsecured debts, like medical bills and credit cards, within about six months. Chapter 13 gives distressed debtors up to five years to catch up on past-due secured debt payments, like delinquent mortgage payments.
Medical Bills
Many pundits hoped that Obamacare would all but eliminate medical bankruptcies in the United States. Yet a decade after the Affordable Care Act took effect, medical bills are still the leading cause of consumer bankruptcy filings in Illinois.
When people fall behind on medical bills, the aforementioned downward spiral kicks in quickly. Usually, doctors are very impatient regarding unpaid bills. They quickly sell these accounts to debt buyers, who are even less patient.
Usually, a Chicago bankruptcy lawyer strategically uses reaffirmation agreements in this area. Doctors usually cut off patients who owe money, whether those patients file bankruptcy or not. Continuing to make payments on one or two accounts keeps a patient in that doctor’s good graces.
Student Loans
Statistically, most student loan borrowers quickly make up the income they lost by going to school and borrowing money. In effect, most student loan borrowers must drive Hyundais instead of Audis for five or six years.
Life doesn’t always work out according to statistics. If things don’t go exactly as hoped or planned, student loan debtors could have huge obligations they cannot hope to repay.
The law recently changed in this area, making it easier for a Chicago bankruptcy lawyer to at least obtain a partial discharge. As a result, once unaffordable payments become affordable, and these debtors have an easier time moving on with their lives.
Business Downturn/Unemployment
Most families have very little savings and basically live hand to mouth. A short-term income disruption, perhaps only a few weeks or months, has a devastating impact. Generally, these families must live on credit cards. That approach is not sustainable for more than a very short while. Credit card interest rates are way too high.
Other times, when income drops, people make unwise sacrifices. They stop paying home mortgages and other secured debts.
Only a lawyer gives these debtors the advice they need as to what chapter to pursue. Non-lawyer bankruptcy petition preparers only fill out forms.
Divorce/Separation
For both filing and nonfiling parties, divorce and separation are incredibly expensive. Instead of splitting household expenses, each spouse must pay his/her own way. Furthermore, in most cases, each spouse must pay thousands of dollars in attorneys’ fees. Largely for these reasons, a trip to divorce court usually means a trip to bankruptcy court as well.
We usually recommend that couples file bankruptcy before their property settlements are finalized. Once bankruptcy clears up excess debt, the property settlement is smaller and more manageable. We should note that bankruptcy usually does not affect child support, spousal support, and other such obligations. FSOs (family support obligations) are generally nondischargeable in any kind of bankruptcy.
Rely on a Dedicated Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
Source:
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/process-bankruptcy-basics/
