Five Reasons People File Bankruptcy In Illinois

In general, most people file bankruptcy because, well, they are bankrupt. But the specific reasons might surprise you.

Bankruptcy has immediate and long-term benefits for distressed debtors. Bankruptcy’s Automatic Stay instantly halts creditor adverse actions, such as foreclosure and repossession. In most cases, these creditors can repossess your house or car if you miss only one monthly bill. Furthermore, bankruptcy gives debtors up to five years to erase secured debt delinquency. They do this by making an income-based debt consolidation monthly payment to the trustee (person who oversees a bankruptcy for a judge).

A Chicago bankruptcy lawyer can unlock some additional benefits, such as lien stripping, which reduce your monthly debt payments even further.

Medical Bills

Since the end of the Great Recession, medical bills have increased significantly. For example, most hospital stays cost a minimum of $2,500 a day. Many stays cost much more than that. So, it’s little wonder that medical bills trigger about two-thirds of the consumer bankruptcy filings in Illinois.

A significant number of the people who file medical bankruptcies have health insurance. Many health plans only cover 80 percent of most medical costs. 20 percent of the cost of cancer treatments or other chronic disease treatments is an awful lot of money.

Job Loss

Since most families live hand to mouth in the Prairie State, even a few weeks without a paycheck is often financially crippling. To pay everyday expenses during these time periods, many people rely on credit cards. These cards have an average interest rate of over 20 percent. So, this strategy is only sustainable for short periods. Typically, if your credit card balance exceeds 10 percent of your annual income, there’s no practical way to pay off that debt.

Bankruptcy eliminates most unsecured debts, such as credit card debt and unpaid medical bills. Erasing these obligations is usually a first step toward the fresh financial start your family deserves.

Overspending

Poor spending habits are almost never the primary factor in a bankruptcy filing. But overspending is often a contributing factor. Bankruptcy, especially Chapter 13 bankruptcy, allows families to re-evaluate their spending habits, so they are more likely to make it through the next financial crisis.

Divorce/Separation

When one household splits into two, many monthly expenses double. Additionally, there are divorce-related expenses to consider, such as attorneys’ fees. Furthermore, divorce and separation usually means a dramatically lower standard of living for one spouse and high support payments for the other one.

Family Support Obligations, like alimony, are usually not dischargeable in bankruptcy. But bankruptcy does take care of attorneys’ fees and many other divorce-related bills. Marriage dissolution typically means a fresh emotional start. Bankruptcy gives you a fresh financial start as well.

Death in the Family

These events usually trigger emotional and financial pain. Bankruptcy cannot directly address the emotional pain, but it can take care of the financial issues.

Financially, a death in the family is often a triple whammy. The family often must deal with high medical bills from the decedent’s final illness, an expensive funeral, and unpaid regular bills due to the loss of income. These expenses are usually dischargeable. Additionally, life insurance proceeds are normally exempt. So, families can use this money on other things. That’s probably what the decedent would have wanted. 

Reach Out to Diligent Cook County Lawyers

Most people file bankruptcy due to circumstances which were at least mostly beyond their control. For a free consultation with an experienced Chicago bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html