Top Five Reasons People File Bankruptcy

During the 2020 coronavirus lockdowns, the unemployment rate peaked at 14.8 percent. That’s the highest figure in recorded history. Most of those jobs are back now. However, since most families live from hand to mouth, even a brief income disruption could have devastating consequences. That’s especially true since the earth continued turning. In fact, the pandemic exacerbated things like serious illness and family troubles.

Job loss is just one reason that people seek consumer bankruptcy protection. The reasons are diverse, but most of them have a common denominator. In most cases, the circumstances which caused bankruptcy are beyond your control. But, with the help of a Chicago bankruptcy lawyer, these families can take control of their own financial situations.

Medical Bills

Hospital bills and other medical expenses are by far the leading cause of consumer bankruptcy in Indiana. According to some estimates, unpaid medical bills prompt as many as two-thirds of bankruptcy filings.

The Affordable Care Act offered some relief in this area. But medical bill inflation has gone up significantly since the end of the 2008 Great Recession. The ACA simply cannot keep pace with these increases.

At any rate, lack of insurance is not the only problem. Deductibles and copays alone, especially for something like cancer treatments, are more than most people can pay. Additionally, most health plans have lifetime coverage limits. These limits usually seem high, but frequently, the limit isn’t high enough.

Business Downturn

The coronavirus lockdowns were very hard on businesses. Ridesharing companies are a good example. Many people became dependent on a second income as an Uber or Lyft driver. COVID-19 dried up this income stream almost completely, and almost overnight.

During the pandemic, people who missed their monthly bills missed them by about $300. So, the limited income from a side hustle often made a tremendous difference. Gigs like Uber and Lyft driver, as well as part-time jobs, are now an option again. But for many families, that might be too little, too late.

Job Loss

Many families can absorb temporary business downturn, since a side hustle is usually just that. But job loss usually affects a family’s primary income stream. These disruptions are very hard to absorb.

Income disruptions like job loss usually have a snowball effect. Some families turn to credit cards in order to meet monthly expenses. Others pull money from house or car payments so they can buy food and keep the lights on. Either approach is only sustainable for a few months, at most.

Divorce/Separation

The aforementioned coronavirus economic issues usually had emotional consequences for families. Money matters are the leading cause of marital problems. Lockdown depression and other negative feelings certainly didn’t help.

Separation and divorce is a financial double whammy. When one household suddenly becomes two households, many expenses double while income remains the same. Meanwhile, divorce-related payments, such as child support and attorneys’ fees, add hundreds of extra dollars a month to the wrong side of an income/expense ledger.

Overspending

We would be remiss if we left this bankruptcy cause off the list. Overspending is almost never the primary reason people file bankruptcy. But it’s often a contributing cause. Consumer bankruptcy discharges debt and helps people reassess their financial priorities. This combination usually eliminates this problem, so your financial future is much brighter.

Count on Diligent Cook County Lawyers

If your family is dealing with financial distress, it’s probably not your fault. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC.

Resource:

fas.org/sgp/crs/misc/R46554.pdf