Top Five Reasons People File Bankruptcy

Most people in Chicagoland do not have the cash to address a $400 emergency expense. So, most households are already on the edge of bankruptcy. Just one financial storm, like one of the ones discussed below, is enough to force most families underwater.

In times of financial crisis, people used to be able to count on a network of federal laws. But some recent federal court decisions have significantly eroded many of these laws, especially the Fair Debt Collection Practices Act. Fortunately, distressed debtors can still count on a Chicago Chapter 13 bankruptcy attorney to extend a needed lifeline.

That lifeline includes the Automatic Stay. Section 362 of the Bankruptcy Code prohibits all kinds of creditor adverse actions, such as repossession and foreclosure. Additionally, bankruptcy discharges unsecured debt, like medical bills. It also gives people time to erase mortgage delinquency and other secured debt.

Medical Bills

The Affordable Care Act somewhat reduced the number of medical bankruptcies. Yet according to a recent Harvard study, excess medical debt causes about 62 percent of all consumer bankruptcies in the United States. 78 percent of these people had medical insurance. But an 80/20 plan, like Medicare, still means thousands of dollars in medical bills for diabetes and other chronic conditions. Doctors usually quickly turn over unpaid medical bills to aggressive debt buyers. If you are struggling with medical bills, the longer you put off bankruptcy, the worse things get.

Divorce/Separation

When marriages break up, incomes go down. Some people must liquidate valuable assets during a marriage dissolution, and others must meet substantial alimony obligations. Pretty much everyone who goes through a divorce must run a household on one income instead of two. There are also staggering legal fees to consider, in many cases. If financial problems accompany your marriage dissolution, it’s usually best to file bankruptcy before the divorce is final. The Automatic Stay gives you immediate relief, and after debt discharge, the divorce property settlement is usually easier.

Job Loss/Business Downturn

A few people who lose their jobs receive considerable notice and a severance package. But most people just find pink slips on their desks. Even a couple of months without a steady income source is devastating for most families. Furthermore, these factors often overlap. People without jobs must often rely on expensive COBRA health coverage, and as a result, they may fall behind on other bills.

Overspending

For the most part, bankruptcy is not your fault. But that’s not true in all cases. Many people get carried away when times are good, making purchases like large houses. As a result, they are ill-equipped to deal with something like medical bills or a job loss.

Unexpected Expenses

Most people do not have reserve funds to deal with things like a death in the family or an uninsured property loss, like a flood or a tornado. With nothing to fall back on, they must rely on their regular incomes to absorb these extraordinary expenses. Usually, the math simply does not work. Typically, people in these situations miss a bill here or there, and then debt problems snowball.

Connect with Dedicated Lawyers

Regardless of what caused your financial problems, bankruptcy may be the solution. For a free consultation with an experienced Chapter 13 Bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.

Resource:

federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf

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