Bankruptcy doesn’t have the best reputation. There is a persistent social assumption that filing for bankruptcy is a bad thing, that it means you’ve mismanaged your finances and should therefore be looked down upon. That archaic (and wrong) way of thinking often comes from a misunderstanding of the bankruptcy process.
Bankruptcy can Provide Relief
Each person’s situation is unique, but bankruptcy can often provide great financial relief and a fresh start for honest consumers. Nobody wants to file for bankruptcy, but if faced between the option of maintaining face or providing for their family, most will choose the latter.
Why People File for Bankruptcy
People file bankruptcy for many reasons. You might have perfect credit and a puppet master’s grip on your finances, but unforeseen life events can change everything. Below are some of the top reasons people go bankrupt:
- Medical Expenses: In fact, medical expenses are the largest cause of bankruptcy filings in the United States. If you or a family member suddenly falls ill, will you still have a good handle on your finances?
- Job Loss/Reduced Income: When companies scale back, employees take the brunt with pay cuts and job losses. If this happened unexpectedly, how long would you be able to remain financially secure?
- Divorce/Separation: Attorney fees aside, a divorce or separation can be very costly. It often means going from two incomes down to one and can result in a significant loss of assets.
- Unexpected Expenses: From the small to the large, there are countless unexpected expenses in life. If your car needs new tires or your house floods, you might have to deplete your savings or use a credit card to take care of things.
- Student Loans: The average student loan debt in the United States is $37,172. Student loans are a large contributor to bankruptcy filings. Unfortunately, this debt cannot be forgiven in bankruptcy.
- Credit Card Debt: The mismanagement of credit cards is what most people think leads to bankruptcy. They are not wrong, large amounts of credit card debt can certainly pile up due to overzealous spending, but it can also pile up due to any of the other life-related reasons on this list.
All of the above reasons can make filing for bankruptcy a positive step for individual consumers.
Hire a Bankruptcy Lawyer
The best way to know if bankruptcy is a good option for you is to meet with an experienced bankruptcy attorney. Hiring a lawyer to assist you is one of the most important steps in determining your eligibility, successfully filing bankruptcy, and avoiding legal consequences. Bankruptcy can be a lengthy process, sometimes lasting years. The process requires hearings, payment schedules, counseling sessions, trustee meetings, and many other deadlines. An experienced bankruptcy lawyer will be familiar with these steps and can help you meet all your deadlines.