At Lifeback Law, we have been at filing Chapter 7 and Chapter 13 bankruptcies for a very long time. In fact, we have been filing bankruptcies since 1972. Kain & Scott is Minnesota’s oldest bankruptcy law firm. Throughout these many decades we have seen a thing or two as to what causes our guests in Minneapolis, Minnesota to file chapter 7 bankruptcy.
The idea that anyone might incur debt knowing they are going to file bankruptcy is incorrect and immature. I have never met a single person yet who did not want to pay their bills given a chance to do so. I cannot tell you the amount of stress that overwhelming debt can cause both physically and mentally.
So, why then do Minnesotans file chapter 7 bankruptcy in the greater Minneapolis-St Paul area, or anywhere else in Minnesota for that matter? What we have found may surprise you. We have grouped the common reasons why Minnesotans file chapter 7 bankruptcy into a list of 5 common reasons that cause a chapter 7 bankruptcy filing.
5 REASONS MINNESOTANS FILE CHAPTER 7 BANKRUPTCY
1) BUSINESS FAILURE:
The American dream right? Shed your job and ditch your boss for the chance to become your own boss, with freedom to do as you please and make as much as you want right? Many businesses succeed and many don’t. The vast majority of business ventures end with the business closing its doors. The number of businesses that survive the 5 year mark is relatively small.
Do you think any of these people started businesses hoping they would fail miserably? Do you think when these businesses fail the owner is happy about personally guaranteeing most of the business debt, taking credit cards out to keep the company afloat, and possibly even liquidating their own pensions to fund the business? Of course not. No one dreams the business will fail when they start it. Just the opposite. The owners hope that the business sprouts wings and begins to fly on it’s own making more profit than you can stand!
When this does not happen, bankruptcy is there to give you a fresh start. Business failure is a big trigger that causes a chapter 7 bankruptcy filing. Better to have taken a shot and failed then to never have tried.
2) INCOME DROP
Have you ever sustained a drop in income? If so, you know how painful this can be. Most of us have a lifestyle that matches our income. If you are making 2k in overtime for the last 10 years chances are you have grown accustomed to this pay and your bills match what you bring into the home each month.
Now imagine that for the first time in 10 years the overtime is reduced to $0. There just went 2k a month income you had seen for the last 10 years. Not good. At first, you may use credit cards to make up for the 2k in overtime you lost but as time goes on, and the overtime is not coming back, you auger yourself into the abyss.
Suddenly, instead of your expenses going down, your payments are going up from the mounting credit card debt. And one day, you wake up and say crap, 80% of my monthly credit card payment is going to interest alone. Something has to give.
Income drop can and does happen to anyone of us.
3) MEDICAL BILLS
I can remember growing up in a family of 9 kids and 2 parents. My dad was a factory worker whose income was very modest. Yet, he had medical insurance on all of us that by today’s standards would look like the gold policy. Little to no co-pays and very modest amount of deductibles if any.
Today, it seems like just the reverse- premiums are expensive and policies cover less and less. Do people get sick less? Hardly. The amount of medical debt we see sometimes is staggering. A person can hardly help getting sick now can they? Medical debt can be a big driver in the decision to file chapter 7 bankruptcy.
4) DIVORCE/RELATIONSHIP BREAKUP
Since the beginning of time, relationships are formed and relationships break up. Sometimes, when the relationships break up the aftermath can lead to total financial devastation. Just breaking up alone often leads to doubling your expenses and reducing your income by a lot. Why? Because when relationships end, there usually is another whole set of monthly expenses from another place to rent etc. Plus, the party who left took their income with them. That leaves the party who remains with less income as well.
This is not to mention expenses associated with divorce lawyers, custody lawyers, child support, and other legal expenses. For most of us living on the edge to begin with, it is easy to see how a relationship break up would push almost anyone over the edge into the debt abyss.
5) BAD FINANCIAL DECISIONS
When I ask groups how many of you have made bad financial decisions, all hands go up. If you are alive and breathing, you have made bad financial decisions which means we all have. Sometimes, we get weak and spring for an item that we shouldn’t purchased. I can’t even count the number of ways to make bad financial decisions. I once thought buying stock on margin was a really good idea. Buying stock on margin means you borrow money to purchase the stock. Really? What in the hell was I thinking?
Well, I got excited and thought I could make a fortune. Instead, I lost my ass. If you want to talk about all of my bad financial decisions, pull up a chair because you will be here all day! If you are human you have made bad financial decisions. Guess what? That means we all have. If you say you didn’t you are either lying or you are not human.
CONCLUSION
Whether you live in Minneapolis, St Paul, Eagan or Eden Prairie, Minnesota, overwhelming debt sucks no matter how it is caused. There are ways to resolve debt problems for good. At Kain & Scott, we not only help you 1) get rid of debt, we also 2) repair your credit fast.
When the time is right, and when you are ready, visit us anytime at Minnesota Bankruptcy 24/7 Help line at www.kainscott.com. You will be glad you did!
