Top 5 Reasons You Might Declare Bankruptcy

Posted: July 25, 2014 By Krigel & Krigel

While many people prefer to avoid filing for bankruptcy protection, it is often a great strategy to help you or your business move forward in a positive direction. In fact, filing for bankruptcy protection is not about running away from your debt but, rather, obtaining court approval for a plan of action to deal with your debt. There are many reasons why you might file for bankruptcy and we will cover five of them here.

Unexpected Medical Bills

The most common reason people file for bankruptcy is due to medical situations. Medical care is expensive and when you need such care, you will seek the best and most qualified care, regardless of the cost. And, as you are aware, those costs can be overwhelming. If you or a loved one has experienced a situation similar to this, you should consider speaking to an experienced bankruptcy attorney to learn about your legal rights. Also remember that you are not alone in this fight. In fact, nearly 2 million individuals in 2013 used bankruptcy protection to help resolve unpaid medical bills.

Unexpected Job Loss

In recent years many individuals have suffered an unexpected job loss and were forced to make quick changes to their spending habits. If you are experiencing this situation, you may be considering filing for bankruptcy and such an action may be helpful to you. Of course, you need to carefully select the proper type of bankruptcy petition and also the timing. For example, a Chapter 7 bankruptcy petition is used to completely discharge your unsecured debt while a Chapter 13 bankruptcy petition is used to reorganize your debt. Some individuals will be able to seek Chapter 7, while others can only seek Chapter 13. Understanding your rights is important and a good bankruptcy attorney can help you make the right decisions.

Bill Collectors

The average American household has over $15,000 in credit card debt and if you can’t make your credit card payments your credit card companies may sell your debt to debt collectors. Those debt collectors will take quick action to collect on the debt and the pressure can be substantial. Luckily, in some situations a properly filed bankruptcy petition can seek to cancel some or all of that debt. But the timing and chapter election can drastically change your legal rights, especially if you recently used the cards to make large purchases right before filing a petition.

Upside-down and Predatory Mortgages

If you cannot make your mortgage payments, then you may be looking at bankruptcy protection as a means to help you through rough times. When this happens you also likely want to keep your home and the good news is there are options in bankruptcy proceedings for doing just that. Specifically, most states have a “homestead exemption” which helps individuals to do one or more of the following: prevent foreclosure, reduce mortgage payments, and/or exempt your home equity from being included in your assets.

Divorce/Separation

Divorce and separation involves a careful examination of financial situations. For example, a judge may order one party to pay child support, alimony, or other costs, and often some property must be sold or otherwise distributed. When these situations arise, one party may see a major shift in his or her spending habits and sometimes that will result in financial problems. If the problems are too great for the individual to handle, he or she should consider the benefits of filing for bankruptcy to ease some of the resulting problems.

If you are experiencing any of these issues or another financial problem and you are curious if bankruptcy can help you, then be sure to contact one of our Bankruptcy Attorneys today.


Image: Thinkstock/Minerva Studio

*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.

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