Top Five Reasons People File Bankruptcy In Illinois

In general, people file bankruptcy in Illinois to stop adverse creditor actions, like repossession and foreclosure, eliminate debt, and basically get a fresh start. The specific reasons vary, as outlined below. But for the most part, these specific causes are beyond the debtor’s control.

The causes of severe financial stress might be beyond your control. But the solution is within reach. A Chicago bankruptcy lawyer guides you through the complex process. That’s not just limited to the areas mentioned above. An attorney can also unlock some advanced money-saving bankruptcy features. In other words, only a Chicago bankruptcy lawyer maximizes your fresh start.

Medical Bills

After a brief respite during and after the Great Recession of 2008, medical bill inflation is on the rise again. Over the past several years, medical bill inflation has been higher than Consumer Price Index inflation. And, we all know how much the CPI has increased recently. Generally, medical insurance only pays about 80 or 90 percent of medical costs. That’s a very high proportion. But 15 percent of a $40,000 cancer treatment bill is more money than most families have on hand.

So, it is not surprising that medical bills account for almost two-thirds of the consumer bankruptcy filings in Illinois. For the most part, these obligations are dischargeable, unsecured debts. Additionally, debtors may elect to reaffirm certain debts, so they can stay in a certain doctor’s good graces.

Job Loss/Economic Downturn

Most families live from paycheck to paycheck. So, even a brief period of unemployment could be financially devastating. In these situations, many people stop paying certain bills to stay current on other obligations. For example, they might skip a few student loan payments so they can stay current on their rent. In that situation, the student loan arrearage becomes unmanageable in just a few months.

Economic downturn which affects a side hustle often has a similar, albeit delayed, effect. Frequently, when this income stream dries up, many people stop making estimated tax payments. That strategy might work for a while. But come the following spring, the bottom falls out.

Divorce/Separation

Typically, most families effectively budget for predictable expenses, such as housing, utilities, regular debt retirement, like credit card payments, and transportation costs. Divorce-related expenses are usually unanticipated. Expenses like attorneys’ fees, rental deposits, and support payments are also quite high. These costs often wreck even the most carefully-prepared budget.

Almost all of these costs are unsecured debts. These obligations are usually dischargeable, as outlined above. Some of these expenses, like domestic support obligations, are not dischargeable in bankruptcy. However, the Automatic Stay still applies, which means adverse actions like lawsuits and wage garnishment stop.

On a related note, some people proactively file bankruptcy prior to divorce. This move usually reduces the size of the marital estate and makes the property division less time-consuming.

Family Emergency

Most people have almost no savings. So, they are ill-equipped to manage funeral expenses, emergency bailouts, and other such situations. However, most people cannot say no to family members in need. So, they write checks anyway.

Such unexpected expenses often trigger a snowball effect. Since families often spend their cash on emergencies, they use credit cards for other bills. These cards have an average interest rate above 17 percent. So, there are only so many months that a family can rob Peter to pay Paul.

Overspending

Banks and credit card companies push the myth that reckless overspending causes most bankruptcy filings. Like many myths, this one has a grain of truth. Some people are determined to live above their means. In a few cases, such overspending leads straight to bankruptcy court.

 Rely on Dedicated Cook County Lawyers

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.

Resource:

law.cornell.edu/supct/pdf/05-996P.ZO