Top Five Reasons People File Bankruptcy in Illinois

People file bankruptcy for various reasons. But the benefits of bankruptcy are usually the same. This federal program halts adverse creditor actions, such as repossession and foreclosure. Section 362 of the Bankruptcy Code applies even if there is no evidence of lender wrongdoing or negligence. Bankruptcy also protects your family’s most important assets, like houses, personal property, retirement accounts, and government benefits.

Additionally, a Chicago bankruptcy attorney can help families take advantage of advanced bankruptcy options. Cramming and stripping are good examples. If a family is underwater on a house, car, or other such asset, they might be able to pay the current fair market value and get out from under the loan. Lien stripping often applies in 80/20 mortgages where the house’s value is not high enough to secure both liens.

Medical Bills

Even after the passage of the Affordable Care Act, medical bills are still the leading cause of bankruptcy in the United States. Cancer and other serious chronic illnesses are usually the culprit. Cancer survival rates have increased significantly since the 1990s, and so have the medical bill amounts.

Making matters worse, many people struggling with medical bills also have limited incomes. And, most people have little or no savings as a cushion.

Bankruptcy addresses short-term and long-term needs. As mentioned, the Automatic Stay halts collection lawsuits and other adverse actions. Furthermore, bankruptcy discharges unsecured debts, such as medical bills. So, families need not give their savings to hospitals and doctors.

Job Loss/Economic Downturn

The lack of savings makes people especially vulnerable to income interruptions. Even a few weeks without a paycheck, or a significantly lower paycheck, usually has a devastating snowball effect on a family’s finances.

Just like illness is not your fault, economic downturn and job loss are not your fault, at least for the most part. And, bankruptcy was designed to give relief to the honest yet unfortunate debtor.

Bankruptcy cannot reverse job loss or economic downturn. However, bankruptcy does give these families some additional breathing room, thanks to the Automatic Stay and unsecured debt discharge. Credit card bills are also unsecured debts.

Divorce/Separation

The marriage dissolution rate has declined significantly in recent years, but it is still twice as high as it was a generation ago. Illinois law dictates that divorce must not be an unfair financial burden on either party. But alimony and other family support obligations only do so much.

Bankruptcy and divorce almost inevitably go together. It is usually best to file bankruptcy before divorce. Bankruptcy shrinks the marital estate, making it easier to equitably divide the remaining assets and debts.

Furthermore, bankruptcy makes a subsequent marriage stronger. Money is one of the leading sources of marital discord. Taking control of your finances with bankruptcy removes money from the equation.

Natural Disaster

Coronavirus is the obvious example of a natural disaster which leads to bankruptcy. A number of large retailers have already declared bankruptcy as of August 2020. Many observers predict that additional commercial bankruptcies, and a wave of personal bankruptcies, are almost sure to follow.

Other natural disasters include fires, tornadoes, floods, and hurricanes. Insurance might cover most of, but not all of, the resulting financial losses.

There are different types of personal bankruptcies. Chapter 7 discharges credit cards, medical bills, and other unsecured debts within a matter of months. Chapter 13 gives families up to five years to catch up on past due secured debt obligations, like mortgage payments.

Overspending

Moneylenders would have people believe that this category is at or near the top. Overspending is a factor in many consumer bankruptcies, but it is rarely the most prominent factor.

Additionally, overspending often overlaps with another cause. Assume Ricky loses his job as a band leader. As a result, when Lucy does the shopping, she cannot pay cash for groceries. Instead, she must use credit cards. No family can live like that for more than a few weeks without experiencing devastating financial consequences.

Count on Effective Lawyers

If you need to declare bankruptcy, your financial problems are almost certainly not your fault. For a free consultation with an experienced bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.

Resource:

ncbi.nlm.nih.gov/pmc/articles/PMC5865642/

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