Bankruptcy helps individuals and businesses who can no longer pay their debts eliminate or repay them under the supervision of the court. Several factors, particularly unexpected life events, can lead to debt outweighing income.
This can eventually result in someone filing for bankruptcy. Let’s look at three unexpected life events that cause people to file for bankruptcy.
Job loss
The loss of income is a leading reason behind bankruptcy. Living expenses remain when someone loses their job. Consequently, someone may deplete their savings and start relying on credit cards and high-interest personal loans to cover necessities.
With time, this can lead to missed rent/mortgage and car loan payments, combined with accumulating interest. This can put someone at risk of foreclosure or repossession, which can cause them to declare bankruptcy.
Medical expenses
A significant percentage of bankruptcy filings are triggered by overwhelming medical expenses. This even includes individuals who have health insurance, as high deductibles and noncovered procedures can leave a patient to pay bills out of pocket.
Loss of income and medical expenses are often intertwined. When someone misses work or stops working altogether because of an illness, they can lose wages and employer-sponsored health insurance. Accordingly, they may turn to high-interest credit cards and loans to avoid defaulting on medical bills, which can get out of hand quickly, resulting in high unpaid balances for health care services.
Divorce
Going through a divorce involves paying legal fees and the division of assets and debts. This can mean using savings, depending on credit cards and being assigned debts. Transitioning from a dual-income household to a single-income one can also lead to financial strain. These, in addition to potentially paying child and spousal support, can result in the need to file for bankruptcy.
Anyone can face a financial difficulty that warrants filing for bankruptcy. If you are in such a situation, get more information to protect yourself. Getting experienced legal guidance can help.
