Most people assume that the only benefit they will receive from a personal bankruptcy is debt elimination. However, personal bankruptcy does more than simply eliminate your debts. Personal bankruptcy aims to treat the cause that brought you to the bankruptcy court, as well as addressing the symptoms of a financial crisis. For example, filing a bankruptcy case will not only eliminate the debt associated with these top five reasons people fall into debt, it will also help them address the symptoms that built up to cause financial crisis.
Medical Costs
Even when individuals have health insurance, a serious medical emergency can result in medical bills that are unmanageable. Because of high deductible health insurance policies, most people do not have the funds in savings to cover the first $5,000 or $10,000 of medical costs, much less the percentage they owe after the deductible is met. In most cases, lost income due to the medical illness makes it impossible to pay livings expenses and other bills. A bankruptcy filing will help by relieving you of the responsibility of paying the medical debts and other bills, giving you time to recover from your injuries or illness without the stress of dealing with unpaid bills.
Business Failure
Unfortunately, with today’s economy, many businesses are forced to close the doors due to competition and decreased sales. When this happens, the owner is left to pay the bills that the business could not pay before it closed. Many business owners guarantee their business debt; therefore, when the business closes, the owner is left with all of the bills and no income to pay creditors. A bankruptcy can wipe out that business debt and protect your personal assets so that you can recover from losing your business and find another means of income to provide for your family.
Income Loss
In most cases, people aren’t prepared for losing their jobs. Even for individuals that have an emergency fund, which is typically only enough for two to three months of expenses, this unexpected change of events causes turmoil. Unfortunately, unemployment will not cover all of your bills and finding a job before your unemployment benefits ends is sometimes impossible. Many must use their limited resources to continue to put food on their table and to pay for housing, utilities and transportation. This leaves very little, if anything, to pay other bills. Once you find a new job, you are faced with collections and possibly lawsuits to collect debts. Filing a personal bankruptcy can wipe out those debts and give you the fresh start that you need in order to rebuild your finances with the income you are earning from your new job.
Divorce
Divorce is difficult on you, both emotionally and financially. In many cases, both spouses are left with substantial debt that they must now carry alone, in addition to 100% of the living and household expenses. Once you add attorney’s fees and court costs, it is easy to see why individuals come out of a divorce unable to pay their bills. While alimony and child support are non-dischargeable in a personal bankruptcy, you can discharge other unsecured debts to give you a fresh start as you begin rebuilding your life after surviving the emotionally and financially difficult process of divorce.
Poor Financial Decision-Making
No one goes through life making the correct choices in all situations. At one point in our lives we have all made a poor decision in regard to our finances. It could have been that once-in-a-life time vacation that you took only to come home to discover your job was eliminated. It could be a vehicle or home that the sales agent convinced you that you could afford, or the overuse of credit cards. The wonderful thing about personal bankruptcy is that it does not judge your behavior, but it does help you solve your debt problem so you can move forward and learn from your previous decisions. There is no shame in filing a bankruptcy case; our legislatures created the Bankruptcy Code to help individuals just like you.
Experienced bankruptcy attorneys devote their time and attention to answering your bankruptcy questions and preparing you for life after bankruptcy. Filing a personal bankruptcy gives you the opportunity to resolve your financial problems and begin again with a fresh start. Download our Debt Solutions 101 eBook to research your options for addressing these 5 common causes of financial difficulty.
