When many people run into financial troubles, they turn to bankruptcy. Bankruptcy is a process that helps businesses and consumers eliminate many or all of their debts so that they can move forward with a clean financial slate.
There are many reasons why some individuals file for bankruptcy. Here are five common reasons below.
1. Decreased income or layoff
Some employers cut employees’ hours to the point where they’re working part-time. Other workers experience layoffs because a company wants to downsize or is going out of business. Either way, that’s a financial hit most people can’t afford.
Divorce reduces household income for each party. Financial troubles are even worse for non-breadwinners because they now have to find a way to support themselves. That can create a financial hole that’s impossible to escape without bankruptcy.
3. Medical bills
Medical debt is a major issue for those lacking savings or health insurance. (After all, no one plans on getting sick or injured.) About 41 percent of American adults have medical debt from under $500 to $10,000+. And for some patients, health insurance isn’t enough because it might cover a portion of their bill.
4. Unexpected expenses
As Murphy’s law states, “Anything that can go wrong will go wrong.” Cars break down. The toilet needs fixing. A smart device needs to be replaced. These unexpected expenses are bigger burdens for low-income families and they can accumulate over time into insurmountable debt.
Some people spend more than they make because they don’t realize how easy it is to get sucked into various “credit traps,” whether that’s from credit card use, payday loans or something else.
Individuals find themselves in financial straits for a host of reasons. But even if they’re afraid to admit it, bankruptcy might be the solution to aid them. If you’re considering bankruptcy, reach out to legal assistance to explore your options.