Top 8 Reasons Why People File for Bankruptcy
The latest bankruptcy filings show that more than 240,151 people file for bankruptcy every year in California alone. Many people have the misconception that only those with poor financial management skills end up in bankruptcy proceedings. However, that is far from the truth. Our Los Angeles bankruptcy attorneys shed light on the top eight unexpected reasons why people file for bankruptcy.
#1: Medical Expenses
Medical expenses are among the top reasons for filing bankruptcy. In many cases, individuals experienced unexpected accidents or illnesses that lead to extensive medical bills and related expenses. Medical expenses can quickly add up – leaving patients with overwhelming debt. Studies show that 72 percent of those who filed for bankruptcy due to medical expenses had some sort of medical insurance but it didn’t cover most (if not all) of their medical treatments.
#2: Loss of Employment
When a person loses their job unexpectedly, their savings can disappear quickly. This is a situation that many Californians have experienced especially in recent months. Whether a person gets behind on payments or relies on loans to provide for their family, losing a job can ultimately result in bankruptcy.
#3: Credit Card Dependence
Contrary to popular belief, credit card debt isn’t always due to a lack of responsibility. When a person experiences hardship, whether it’s unemployment, unexpected expenses, or medical bills, people often rely on credit cards to help them remain afloat. Unfortunately, accumulating credit card debt is a common problem many Americans have, and losing control can result in bankruptcy.
#4: Student Loans
College education has become more and more expensive. About 42.9 million Americans have federal student loans, according to the most recent data from the U.S. Department of Education. That means 1 in 8 (12.9%) people in the United States carry student loan debt. Student loan debt can quickly become overwhelming – becoming a significant contributor (if not the main contributor) to the need for bankruptcy.
Foreclosure is another common reason that leads to bankruptcy. When individuals or couples have the inability to pay their mortgage it often results in foreclosure. Instead of facing the loss of their home, couples often turn to bankruptcy to help them keep their home. More than one percent of bankruptcies are filed to avoid foreclosure.
Divorce is another circumstance that can lead to bankruptcy. Divorce proceedings are expensive and can result in significant financial loss for individuals. In some cases, spouses are also required to pay spousal and child support, which may increase their financial burden.
#7: Overspending & Poor Financing
In some cases, poor management and overspending on unnecessary goods can lead to bankruptcy. Individuals who fail to spend cautiously and splurge on expensive items without financial security may find themselves in a bankruptcy proceeding to get a fresh start.
#8: Home Utilities
The cost for basic utilities, such as heating, air conditioning, electricity, and water is on the rise. Many homeowners often struggle to afford basic home utilities as they juggle paying off other expenses, such as food and clothing. An overwhelming number of expenses and debt often leads to bankruptcy.
How to Deal with Overwhelming Debt
Many individuals experience a combination of the reasons listed above which can make their circumstances even more difficult. Whether you’re going through foreclosure, divorce, or have overwhelming credit card debt, our team at Wadhwani & Shanfeld is here to help you. We have helped more than 20,000 individuals across California regain financial freedom and resolve their debt situation. We have the knowledge, skills, and experience needed to help you obtain the compensation you deserve.
Contact our Los Angeles bankruptcy attorneys today at (800) 996-9932 to schedule a consultation!