Are you aware of why do people file for bankruptcy? Bankruptcy is a measure a lot of people take in order to save money, protect themselves, and provide a way to get some financial stability as they work to pay back the debts they have accumulated.
Although expensive and time-consuming, declaring bankruptcy for some is unavoidable. The following list is a quick rundown of the most common reasons why do people file for bankruptcy:
1. Job loss
The key thing about budgeting is to make the most of the income coming in and to control expenses. When you’ve lost your job – either from being laid off, being terminated, or from resignation – that cuts your income down to zero. Factoring in the loss of insurance coverage as well as the wait time between your last job and your next, and this can quickly result in using savings and credit cards to cover daily expenses.
2. Garnished wages
Some lenders may receive a court order to garnish wages, taking money directly from your paycheck. Once a lender is taking money away from you on every paycheck, this may be increasing your debt with other lenders and the hole that’s been dug only grows in depth.
If a lender’s sent notice they have plans to garnish your wages, declaring bankruptcy can at times prevent this from proceeding and you may even be able to get the debt dismissed.
3. You’ve had to get a second or third job
If you’re holding down multiple jobs and it isn’t temporary to successfully pay down debt, a declaration of bankruptcy is something some can consider. Remember, there’s only so many hours in a day.
If you’re stuck working at your maximum capacity and you still can’t find a way out, it makes sense to cut bait now and go bankrupt rather than wait for further debt accumulation. That said, if a second or third job is helping you and as long as it’s sustainable in the short-term, do what you need to in order to get your debts cleared.
4. Unpaid medical expenses
The biggest single cause of debt accumulation in the United States is medical expenses, responsible for 62 percent of all personal bankruptcies. If you’re having to pay for treatment related to a serious illness, this can easily add up to $100,000s in debt which can wipe out retirement plans, savings, college education accounts, and home equity.
Are you stressed completely out of your mind trying to overcome your financial limitations? Personal time, family, and work are important in life.
When your sanity and enjoyment of life is being interfered with because of debt, bankruptcy may be a way to help you get back on the straight road to stability. That said, we recommend consulting bankruptcy alternatives prior to deciding with certainty on any declaration.
6. You’re paying one credit card with another
Some people don’t have the money to cover their minimum credit card payments and in response, they use one credit card to take transfer money to another. This is simply stalling the inevitable.
You shouldn’t have to take out a cash advance and doing so, your debt still won’t come down. If it’s a one-time thing, it’s not a problem. If it’s a pattern, now you have something to worry about and bankruptcy or a bankruptcy alternative may be the best way forward.
7. Taking money out of your retirement accounts
If you’re taking money from your retirement account to pay down debt, or are considering to, don’t. You’re robbing your future and creating a tax bill which is going to add to your debt.
Removing money from these savings accounts is an ultimate no-no and to this point, it’s worth remembering that retirement accounts are protected in bankruptcy. Avoid pulling money out. You can keep everything you’ve put in, in the event you decide to declare bankruptcy.
8. Everyday necessities are being put on credit cards
When you cannot afford to pay for groceries and gas without a credit card, this is a sign bankruptcy may be a viable option to avoid the accumulation of debt. Paychecks dedicated to paying down debt isn’t fun.
What’s worse about it is that it doesn’t improve the situation. You still end up in debt, using debt to finance all your everyday purchase and with no relief in sight.
9. Interest rates increased after missed payments
If you’ve missed payments on your credit cards and have seen the interest rate rise, this makes it even more difficult to dig a way out of debt. Some interest rates can soar up to 30 percent or more.
After rates are at this level, most of any payment you make each month will be going towards paying off interest. Unfortunately, this could make your debt unpayable and if you’re unable to negotiate a lower rate with your lender, bankruptcy can be one way to overcome circumstances.
10. Despite your best efforts, you’re still in debt
As hard as one may try, if you’ve exhausted every possible route you can think of to pay down debt or to “stop the bleeding” and you still haven’t been able to clear enough, bankruptcy is a consideration which one shouldn’t dismiss. A declaration of bankruptcy may be how you can stabilize things and provide some time to get things in order to pay off the debts you’ve accumulated.