What are the most common reasons for filing for a Chapter 7 bankruptcy?

Filing for bankruptcy provides hundreds of thousands of Americans with a fresh start each year. However, no one sets out hoping that they will one day file for bankruptcy. People file for bankruptcy as a result of unforeseen and unanticipated circumstances. Many reasons for filing for bankruptcy exist, the most common are:

  • Medical expenses – Medical bills are responsible for approximately 62 percent of all bankruptcy filings. While the uninsured have a particularly hard time paying off medical bills after a major surgery or serious accident, even those with health insurance have a difficult time paying their bills.
  • Layoffs – The unexpected loss of a job can wreak havoc on an individual’s finances. Even the most responsible spender counts on receiving a certain amount of income each month. If this income stops coming in entirely, the bills quickly pile up.
  • Reduced income – Many people are making a living doing independent contracting. While these positions can be great side jobs, the income they provide is also subject to extreme fluctuation. If someone’s monthly income drops shortly after making a major purchase such as a house or car, bankruptcy may be a good option.
  • Credit card debt – The average person has over $5,000 in credit card debt, and is paying about 16.5 percent interest. And only 45 percent of credit card holders are able to pay off their cards each month. Over time, these balances – and the minimum payments needed to keep the cards current – tend to increase.
  • Divorce – The dissolution of a marriage is not only emotionally difficult, but can also send even the best planners into a financial tailspin. Often, people end up losing assets or taking on their former partner’s debts.
  • Student loans – Many students have high hopes of landing a high-paying job, only to realize that the job market was not what they thought it to be. Experts estimate that about 1 percent of all U.S. bankruptcies, or 15,000 bankruptcy cases, are filed due to student loan debt.
  • Utility payments – Utility bills are easy to ignore, until they get to the point that they seem impossible to pay back. As the cost of heating, cooling and providing electricity for a home continues to increase, the number of people who get behind in their bills correspondingly increases.

Of course, this is not an exhaustive list. However, the vast majority of those who file for bankruptcy do so for one of these reasons. Most bankruptcies are not the result of careless spending, although some are. Instead, the majority of people who file for bankruptcy do so because they were the victim of an unfortunate circumstance that they were not adequately prepared for.

If you have significant student loans, medical bills or other debt, and trying to repay them is causing you stress, contact the experienced bankruptcy attorneys at Morgan & Morgan to discuss your situation in further detail.

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