Common Reasons for Filing Bankruptcy

Bankruptcy can provide a fresh financial slate if you are struggling with debt that you cannot repay. Unfortunately, there is still a stigma surrounding bankruptcy and people who file it. Contrary to what many people think, those who file bankruptcy are not financially irresponsible. The truth is that the vast majority of adults incur debt at some point in their lives and there are a number of reasons why people often find it difficult to repay it. Below, our Florida bankruptcy lawyer explains some of the most common reasons people file for this type of relief.

Income Loss 

When a person experiences a significant income loss, this can make it extremely difficult to pay for monthly expenses and to manage any debt they are carrying. A total job loss can result in individuals not earning an income for an extended period of time. However, a reduction in work hours, a demotion, or a cut in pay can also make it extremely difficult to repay debt and can result in a person filing bankruptcy.

Unmanageable Home Loans

 For many families and individuals, home loans are the largest source of debt they incur during their lives. When people cannot pay their mortgage, their lender can start the foreclosure process. This can negatively impact a credit score, and result in homeowners losing their home. Filing bankruptcy can prevent these negative outcomes. As soon as a person files bankruptcy, the automatic stay goes into effect, which can halt foreclosure proceedings until the bankruptcy case is finalized.

Credit Card Debt 

Many people file bankruptcy after they have incurred substantial credit card debt. Credit card debt is very common but when a borrower cannot afford to make even the minimum monthly payments, it may be time to file bankruptcy. As unsecured debt, a Chapter 7 bankruptcy can discharge all credit card debt while Chapter 13 can reorganize it and make it more affordable to repay.

Medical Debt 

When a person sustains sudden injury or illness, it can be very difficult to pay for the medical treatment they require. During this time, individuals also often cannot return to work to earn an income to help cover the cost of deductibles, co-pays and services that are not covered by insurance. Bankruptcy can discharge medical debt or restructure it.

Divorce

 Divorce can have a very negative impact on a person’s finances. Living on just one income instead of two is very difficult, and child support and alimony are also often additional expenses incurred during divorce. While family support obligations cannot be discharged during bankruptcy, Chapter 13 can make it easier to repay and credit card debt incurred for increased living expenses can be discharged through a Chapter 7 bankruptcy.

Call Our Bankruptcy Lawyers in Florida Now 

If you are struggling with debt you cannot repay and are considering bankruptcy, it is important to obtain legal advice. At Nowack & Olson, PLLC, our Florida bankruptcy lawyers can help you determine which type to file and guide you through the process so you obtain the best outcome possible. Contact us to schedule a consultation and to get more information.

Source:

uscourts.gov/court-programs/bankruptcy/bankruptcy-basics