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Top Reasons People Turn to Bankruptcy

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It can be difficult to come to terms with the harsh reality of having to file for bankruptcy. However, you are not alone if you find yourself faced with such a challenging decision. According to data from U.S. bankruptcy courts, over 1.5 million people file for bankruptcy annually. And almost 97 percent of bankruptcy filings are made by individuals, and not businesses.

Following are some of the top reasons that people file for bankruptcy:

Medical expenses

A Harvard University study indicated that medical expenses are the reason for 62 percent of personal bankruptcies in the U.S. It is interesting to note that the study also revealed that 72 percent of those who filed for bankruptcy because of medical bills had health insurance, thereby disproving the notion that only those who are uninsured confront financial disasters because of medical expenses. You can file a Chapter 7 bankruptcy to lower your medical debt.

Diminished income

Because companies are reducing their expenses, several employees may be receiving less compensation and smaller bonuses. As a result of such a decrease in pay, many employees may find themselves unable to pay their bills, and may eventually need to file for bankruptcy.

Loss of a job

The loss of a job can be financially devastating for some people. This can be the result even if you receive a considerable amount in severance pay. In addition, you can lose your health insurance, and may incur extra expenses, including COBRA insurance, which can extend indefinitely, for there is no certainty as to when you will obtain another position.

Credit card debt

While some people may believe that credit card debt is a result of careless spending, that is not always the case. Such debt can also accumulate because of financial disasters, including illness, disability, job loss, emergencies, or a sudden decrease in income.

Divorce

Divorce can be very expensive, even if you exclude attorneys’ fees. Divorce can also signify a considerable loss of income and assets for either or both spouses. Additionally, if you co-signed or opened a joint account with your spouse, you may be required to assume part of your spouse’s debt.

Sudden expenses

Emergencies can occur at any time, and quickly deplete your savings and investments that took you years to amass. Examples of such expenses include a car being totaled in an accident, or a house catching fire.

Student loans

A minimum of one percent of all U.S. bankruptcies, or approximately 15,000 bankruptcies annually, are due to unpaid student loans.

 

Bankruptcy can offer a reasonable debt solution for some individuals. Another alternative is to consolidate your debts. However, it is recommended that you confront the issue as soon as possible. If you’re thinking about filing for bankruptcy, contact Joel Spivack today to discuss your options.