Los Angeles Bankruptcy Lawyer Vincent Howard knows that the exact reasons that people fall into debt are just as varied as the individuals themselves.
Yet, there are some commonalities that are generally seen across the board when it comes to Chapter 7 or Chapter 13. Everyone is in this same economic boat together, riding out the choppy waves of unemployment and rising medical costs, while awash in debt and trying desperately not to sink further.
And even life events that might not have led you to this place ten years ago are having significantly different outcomes, given the current economic climate.
So while some people may be hesitant to file for bankruptcy, feeling perhaps that they have failed or that it is something to be ashamed of, Orange County Bankruptcy Lawyer Vincent Howard wants to point out the top reasons why people resort to bankruptcy.
- Medical debt. This is likely utterly unsurprising to anyone who has had any sort of a medical issue the last several years. A Harvard University Study showed that more than 62 percent of all personal bankruptcies were the result of medical debts. Interestingly, nearly 80 percent of those people had health insurance. So why is this happening? A serious disease can easily start the snowball rolling for hundreds of thousands of dollars owed. A lot of people dip into their savings, their retirement, their college funds - and they still can't pay it off. So they seek bankruptcy. In fact, a bankruptcy would be a better option to absolve you of this debt BEFORE you dip into your retirement and other savings.
- Unemployment. No matter the reason behind the job loss, the blow to your wallet can be devastating. A lucky few may receive some type of severance package to help keep them afloat, but that's increasingly rare. This can be especially awful if you were not given prior notice and have little or no savings. Even if you do have savings, keeping yourself and your family insured is likely to suck up most of that.
- Excess use of credit. While it's true that a lot of those who wind up seeking bankruptcy are there through no fault of their own, some do own at least a portion of the responsibility, especially if they got in over their heads with credit card debt. If you have trouble making even the minimum payments on these cards, you probably need to seek bankruptcy. Some people try to go the route of debt consolidation first, but studies have shown that most of these plans end up failing for a number of reasons, and people end up filing for bankruptcy anyway.
- Divorce. This is a tough one. A split is not only emotionally wrenching, it can wreck havoc on your finances as well. There are the legal fees that can accompany a divorce. Then you have the division of your joint assets. Then you may have alimony or child custody payments (which aren't dischargeable in a bankruptcy). Or, you may have a spouse who refuses to pay the support they have been ordered to pay, leaving their former loved ones in dire financial straits.
- Unexpected expenses. These are things like a natural disaster or a major theft. A lot of people may not realize that they have to take out separate insurance policies for things like earthquakes and floods. Those who don't have that extra protection lose not only their homes, but everything inside them as well.
- You are spending more than you earn. Again, this is one of those situations where you must own some of the responsibility. Sometimes it all comes down to this very basic principle.
Los Angeles Bankruptcy Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Top 5 Reasons Why People Go Bankrupt, Staff Report, Investopedia